Flexible Budget Performance Report

The Little Theatre Case 9. 26 Case 9. 26 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 higher. After completing the analysis for the Little Theatre we found that several items could be implemented to have an accurate cost model in the future.

First, we prepared a flexible budget for the Little Theatre based on the actual activity of the year.

We found that there were a number of cost items such as wages, scenery items, and administrative expenses that were under estimated compared to the original anticipated budget. We also found that there were items such as the theater hall rental and the cost of the printed programs that cost less than the budgeted items. Secondly, we prepared a Cost Budget Performance Report for the year that reflected the breakeven point.

We have identified the price and the number of tickets we have to sell in order to cover the cost of the number of productions and the number of performances. The breakeven point was based on the actual cost of each expense. The question was asked, “If you were on the board of directors of the theater, would you be pleased with how well costs were controlled during the year why or why not? ” We were not totally satisfied with the way costs were controlled during the year because the costs below were higher than we anticipated.

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•Wages •Costumes •Publicity •Administrative Expenses

What Type Of Analysis Does A Flexible Budget Performance Report Help Management Perform?

The market may be the reason for the expenses being higher than we forecasted. For example, the theatre may not be able to pay a lower wage to the actors. In the future in order to have an accurate cost model we may improve on expenses such as costumes. We may submit bids to other vendors to see if we can lower costs. Finally, the cost formulas provided figures for the average cost per production and average cost per performance. We wanted to find out how accurate these figures would be for predicting the cost of a new production or of an additional performance of a particular production.

Our analysis revealed that if the Little Theatre did six productions and one hundred and eight performances, the total cost would be $514,921 and the number of tickets that would need to be sold would be 10,298 at a price of $50. 00. We also found that the cost to produce seven productions and one hundred and sixty eight performances would be $726,900. In addition, the number of tickets that would need to be sold in order to cover this cost would be 14,438 at a price of $50. 00. Over all we project the Little Theatre will be successful if they continue to master the flex budget model.