The Sesame Street Theater is a non-profit organization devoted to staging plays

Question

The Sesame Street Theater is a non-profit organization devoted to staging plays for children. The theater has a 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 costs from the 2015 planning budget appear below. The Sesame Theater had tentatively planned to put on six different productions with a total of 72 performances. For example, one of the productions was Swan Lake which had six performances.

The Sesame Theater Planning Master Budget

For the Year ended December 31, 2015

Budgeted number of productions: 6 | Budgeted number of performances:72

Actors’ and directors’ wages      $172,800
Stagehands’ wages           32,400
Ticket Booth personnel and ushers’ wages        12,960
Scenery, costumes, and props          51,600
Theater Hall rent           54,000
Printed programs           12,600
Publicity            15,600
Administrative expenses          51,840  
Total         $403,800

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 Swan Lake 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 5, 10, or 15 performances of the play. On the other hand, the wages of the actors, directors, stagehands, ticketbooth 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 theprograms will vary with the number of performances. Administrative expenses are more difficult to pindown, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend onthe number of productions staged, and the remaining 10% depend on the number of performances.After the beginning of 2015, the board of directors of the theater authorized changing the theater’sprogram to five productions and a total of 75 performances. Actual costs were higher than the costsfrom the planning budget. Data concerning the actual costs are shown below:

The Sesame Theater

Actual Costs for 2015

Actual number of productions: 5 Actual number of performances: 75

Actors’ and directors’ wages       $177,600
Stagehands’ wages                34,400
Ticket Booth personnel and ushers’ wages             14,760
Scenery, costumes, and props               47,160
Theater Hall rent                59,520
Printed programs                13,140
Publicity                 14,400
Administrative expenses              49,980  
Total          $410,960

QUESTION:

-Prepare a flexible budget report for the Sesame Street Theater based on the actual activity for theyear showing all variances whether favorable or unfavorable.

-If you were on the board of directors of the theater, would you be pleased with how well costs werecontrolled during the year? Why or why not?

-Based on the 2015 Planning Master Budget calculate the average cost per production and theaverage cost per performance. How accurate do you think these figures would be for predicting thecost of a new production, or of an additional performance of a particular production? Discuss.

Explanation / Answer

Ans 1 The Munchkin Theater The Munchkin Theater For the Year Ended December 31 Actual Standard Actual cost per performance/production Budget cost per performance/production B Nature of expense Basis Flexible Budget (Actual* Budgeted Cost per prod/performance) B*A/C   Actual number of productions A 5 6 For the Year Ended December 31   Actual number of performances C 75 72   Actors’ and directors’ wages 180000   Actors’ and directors’ wages 177600 172800 2368.00 2400 Variable No.of performance   Stagehands’ wages 33750   Stagehands’ wages 34400 32400 458.67 450 Variable No.of performance   Ticket booth personnel and ushers’ wages 13500   Ticket booth personnel and ushers’ wages 14760 12960 196.80 180 Variable No.of performance   Scenery, costumes, and props 43000   Scenery, costumes, and props 47160 51600 9432.00 8600 Variable No.of production   Theater hall rent 56250   Theater hall rent 59520 54000 793.60 750 Variable No.of performance   Printed programs 13125   Printed programs 13140 12600 175.20 175 Variable No.of performance   Publicity 1083.3   Publicity 14400 15600 192.00 216.67 Variable No.of production   Administrative expenses 6480   Administrative expenses 7497 7776 1499.4 1296 Variable 15% No. of production   Administrative expenses 5400   Administrative expenses 4998 5184 66.64 72 Variable 10%(performance)   Administrative expenses 38880   Administrative expenses (Fixed) 37485 38880 37485 38880 Fixed 75%, Total Administrative Expenses 50760 Total Administrative Expenses 49980 51840   Total 391468   Total 410960 403800 The Munchkin Theater Flexible Budget Performance Report For the Year Ended December 31    Budgeted Z Activity Variances Y-Z Variance Flexible Budget     Y Spending Variances   V-Y Actual      V   Actors' and directors' wages 172800 7200 U 180000 -2400 F 177600   Stagehands' wages 32400 1350 U 33750 650 U 34400   Ticket booth personnel and usher wages 12960 540 U 13500 1260 U 14760   Scenery, costumes, and props 51600 -8600 F 43000 4160 U 47160   Theater hall rent 54000 2250 U 56250 3270 U 59520   Printed programs 12600 525 U 13125 15 U 13140   Publicity 15600 -14517 F 1083 13317 U 14400   Administrative expenses 51840 -1080 F 50760 -780 F 49980   Total 403800 -12332 F 391468 19492 U 410960 Ans 2 The cost were not controlled properly as spending variance are unfavorable Ans 3 Standard Actual Average coct per production= 403800/5 67300 82192 Average coct per performance= 403800/72 5608.3 5479.47 Per performance there is less differnce between standard and actual so it is helpful in predicting the cost of actual performance. Per production there is more difference which will not give correct cost per production so this predication is not correct.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.