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KM Flexible Budgeting Case (LO9-1, LO9-2, LO9-3) Theodore's 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. Theodore's Theatre had tentatively planned to put on six different productions with a total of 50 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. Theodore's Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions Budgeted number of performances Actors and directors wages Stagehands wages Ticket booth personnel and where wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total $ 150,000 25,000 16.000 54,000 40.000 13.500 17.400 40.000 $363,900 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 the very with the number of performances. The greater the number of performances, the higher the wage costs will be. Similarly, the costs of renting the has and printing the programs will vary with the number of performances. Administrative expenses are more difficult to pin down, but the best estimate is that approximately 70% of the budgeted costs are fed, 20% depend on the number of productions staged, and the remaining 10% depend on the number of performances a li! Next > IN VIIMuller runurmances. After the beginning of the year, the board of directors of the theater authorized expanding the theater's program to five productions and a total of 54 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: Theodore's Theatre Actual Costs For the Year Ended December 31 Actual number of productions Actual number of performances Actors and directors wages Stagehands wages Ticket booth personnel and users wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses 156,000 26,600 17,500 50,300 44,600 13,950 16.400 46.450 Total $ 371,800 Required: 1. Prepare a flexible budget for Theodore's 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 complete this question by entering your answers in the tabs below. Prey 1 of 3 !! Next > Required 1 Required 2 Prepare a flexible budget for Theodore's Theatre based on the actual activity of the year. Theodore's Thea Flexible Budget For the Year Ended December 31 Actual number of productions Actual number of performances Actors' and directors' wages Stagehands' wages Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total expense Required 2 Required 1 Required Prepare a report for the year that shows the spending variances for all expense items. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Theodore's Theatre Spending Variances For the Year Ended December 31 Actual Results Spending Variances Flexible Budget Number of productions Number of performances Actors' and directors' wages Stagehands' wages Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent 156,000 26,600 17,500 50,300 44,600 13,950 16,4001 46,450 371,800 Printed programs Publicity Administrative expenses Total expense $ KM Check all that apply The following statements are based upon your knowledge of the budgeting process. Please check only those answers that are TRUE. Check All That Apply If the actual cost incurred for the Theatre's rent is greater than the amount in the flexible budget, the variance is unfavorable 0 The number of cost drivers used to prepare a budget is limited to three. 0 greater than net income in the flexible budget, the total overall revenue and spending a company's actual net operating income variance will be favorable. 0 a variance is favorable, and significant in amount, it may be ignored

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