Question

The Little Theatre is a nonprofit organization devoted tostaging plays for children. The Theatre has a very small full-timeprofessional administrative staff. Through a special arrangementwith the actors’ union, actors and directors rehearse without payand are paid only for actual performances.

The costs from the current year’splanning budget appear below. The Little Theatre had tentativelyplanned to put on six different productions with a total of 50performances. For example, one of the productions was PeterRabbit, which had a six-week run with three performances oneach weekend.

The Little Theatre Costs from the Planning Budget For the Year Ended December 31
Budgeted number ofproductions		6
Budgeted number ofperformances		50
Actors’ anddirectors’ wages	$	105,000
Stagehands’wages		20,500
Ticket boothpersonnel and ushers’ wages		11,500
Scenery, costumes,and props		48,600
Theatre hallrent		35,500
Printedprograms		11,250
Publicity		12,600
Administrativeexpenses		46,000
Total	$	290,950

Some of the costs vary with the numberof productions, some with the number of performances, and some arefixed and depend on neither the number of productions nor thenumber of performances. The costs of scenery, costumes, props, andpublicity vary with the number of productions. It doesn’t make anydifference how many times Peter Rabbit is performed, thecost of the scenery is the same. Likewise, the cost of publicizinga play with posters and radio commercials is the same whether thereare 10, 20, or 30 performances of the play. On the other hand, thewages of the actors, directors, stagehands, ticket booth personnel,and ushers vary with the number of performances. The greater thenumber of performances, the higher the wage costs will be.Similarly, the costs of renting the hall and printing the programswill vary with the number of performances. Administrative expensesare more difficult to pin down, but the best estimate is thatapproximately 70% of the budgeted costs are fixed, 15% depend onthe number of productions staged, and the remaining 15% depend onthe number of performances.

After the beginning of the year, theboard of directors of the Theatre authorized expanding theTheatre’s program to five productions and a total of 54performances. Not surprisingly, actual costs were considerablyhigher than the costs from the planning budget. (Grants from donorsand ticket sales were also correspondingly higher, but are notshown here.) Data concerning the actual costs appear below:

The Little Theatre
Actual Costs
For the Year Ended December 31

Actual number ofproductions

5

Actual number ofperformances

54

Actors’ anddirectors’ wages

$

109,000

Stagehands’wages

22,100

Ticket boothpersonnel and ushers’ wages

13,000

Scenery, costumes,and props

44,900

Theatre hallrent

40,100

Printedprograms

11,700

Publicity

11,600

Administrativeexpenses

44,450

Total

$

296,850

Required:

1.

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

The Little Theatre
Flexible Budget
For the Year Ended December 31
Actors’and directors’ wages
Stagehands’ wages
Ticketbooth personnel and ushers’ wages
Scenery,costumes, and props
Theatrehall rent
Printedprograms
Publicity
Administrative expenses
Total

2.

Prepare a report for the year that shows the spending variancesfor all expense items. (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)

The Little Theatre
Flexible Budget Performance Report
For the Year Ended December 31
	Actual Results	Spending Variances		Flexible Budget
Actors' and directors'wages	$109,000
Stagehands' wages	22,100
Ticket booth personnel andushers' wages	13,000
Scenery, costumes, andprops	44,900
Theatre hall rent	40,100
Printed programs	11,700
Publicity	11,600
Administrative expenses	44,450
Total	$296,850