Lancaster Chamber Orchestra When the budget was prepared at the beginning...

Lancaster Chamber Orchestra

When the budget was prepared at the beginning of the year, Alan Voit, director of marketing, admitted that projected ticket sales for the two series were optimistic, but he believed that his innovative advertising campaign would help the orchestra meet its goal. Although pops sales came in almost exactly on target, a devastating ice storm caused the cancellation of one of the classical concerts. Unfortunately, rehearsals had already been held and the musicians had been paid for their services. Series sales figures for the three levels of ticket prices follow.

Required:

a. Calculate a flexible budget for the Lancaster Chamber Orchestra’s 2016–2017 season.

b. After calculating the flexible budget, Randall Nobucs, director of finance, found a total unfavorable variance in net income of $53,158. Account for this unfavorable variance by calculating the following:

(1) Revenue variances

(2) Labor efficiency variances

(3) Overhead efficiency and overhead spending variances

c. Nobucs is concerned that if the orchestra faces similar problems in the next season, the accumulated deficit will cause bankruptcy. He argues with Alan Voit that a 15 percent increase in ticket prices would ensure a balanced budget for the 2016–2017 season. Discuss the feasibility of this strategy.

d. In examining the income statement, CEO Peter Morris is puzzled. He believes that all of his senior staff members are superb and is not sure where to lay the blame for the orchestra’s dismal financial performance. Discuss the areas of specialized knowledge involved in the operation. Which person should be held accountable for each variance?