Question

The Little Theatre is a nonprofit organization devoted to staging plays for children. The theater has a very small full-time professional administrative staff. Through a special arrangement with the actors’ union, actors and directors rehearse without pay and are paid only for actual performances.

The Little Theatre had tentatively planned to put on six different productions with a total of 108 performances. For example, one of the productions was Peter Rabbit, which had a six-week run with three performances on each weekend. The costs from the current year’s planning budget appear below.

The Little Theatre Costs from the Planning Budget For the Year Ended December 31
Budgeted number of productions		6
Budgeted number of performances		108
Actors and directors wages	$	224,640
Stagehands wages		41,040
Ticket booth personnel and ushers wages		24,840
Scenery, costumes, and props		108,480
Theater hall rent		62,640
Printed programs		35,640
Publicity		12,480
Administrative expenses		44,280
Total	$	554,040

Some of the costs vary with the number of productions, some with the number of performances, and some are fixed and depend on neither the number of productions nor the number of performances. The costs of scenery, costumes, props, and publicity vary with the number of productions. It doesn’t make any difference how many times Peter Rabbit is performed, the cost of the scenery is the same. Likewise, the cost of publicizing a play with posters and radio commercials is the same whether there are 10, 20, or 30 performances of the play. On the other hand, the wages of the actors, directors, stagehands, ticket booth personnel, and ushers vary with the number of performances. The greater the number of performances, the higher the wage costs will be. Similarly, the costs of renting the hall and printing the programs will vary with the number of performances. Administrative expenses are more difficult to analyze, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions staged, and the remaining 10% depend on the number of performances.

After the beginning of the year, the board of directors of the theater authorized expanding the theater’s program to seven productions and a total of 168 performances. Not surprisingly, actual costs were considerably higher than the costs from the planning budget. (Grants from donors and ticket sales were also correspondingly higher, but are not shown here.) Data concerning the actual costs appear below:

The Little Theatre Actual Costs For the Year Ended December 31
Actual number of productions		7
Actual number of performances		168
Actors and directors wages	$	363,600
Stagehands wages		62,900
Ticket booth personnel and ushers wages		39,900
Scenery, costumes, and props		131,000
Theater hall rent		90,400
Printed programs		50,700
Publicity		15,900
Administrative expenses		48,700
Total	$	803,100

Required:

1. Prepare a flexible budget for The Little Theatre based on the actual activity of the year.

2. Prepare a report for the year that shows the spending variances for all expense items.

Answer 1

	Flexible budget
Actual number of productions					7
Actual number of perormances					168
Actors and directors wages					349440
Stagehands wages					63840
Ticket booth personnel and usher's wages					38640
Scenery,costumes and props					126560
Theater hall rent					97440
printed programs					55440
publicity					14560
administrative expenses					41205
total
				Actual	Revenue and		Flexible	Planning Budget		Planning
				results	spending variance		budget			Budget
Number of productions				7			7			6
number of performances				168			168			108
Actors and directors wages				363,600	14,160	U	349440	124,800	U	224,640
Stagehands wages				62,900	940	F	63840	22,800	U	41,040
Ticket booth personnel and usher's wages				39,900	1,260	U	38640	13,800	U	24,840
Scenery,costumes and props				131,000	4,440	U	126560	18,080	U	108,480
Theater hall rent				90,400	7,040	F	97440	34,800	U	62,640
printed programs				50,700	4,740	F	55440	19,800	U	35,640
publicity				15,900	1,340	U	14560	2,080	U	12,480
administrative expenses				48,700	7,495	U	41205	3,567	U	37,638
total				803,100	15,975	U	787125	239,727	U	547,398