The City Symphony Orchestra presents a series of concerts throughout the year. Budgeted fixed costs total $300,000 for the concert season; variable costs are expected to average $5 per patron. The orchestra uses flexible budgeting.Required: A. Prepare a flexible budget that shows the expected costs of 8,000, 8,500, and 9,000 patrons.B. Construct the orchestra's flexible budget formula.C. Assume that 8,700 patrons attended concerts during the year just ended, and actual costs were: variable, $42,000; fixed, $307,500. Evaluate the orchestra's financial performance by computing variances for variable costs and fixed costs.
What will be an ideal response?
| A. | Patrons | 8,000 | 8,500 | 9,000 |
| ? | Variable cost at $5 | $40,000 | $42,500 | $45,000 |
| ? | Fixed costs | 300,000 | 300,000 | 300,000 |
| ? | Total | $340,000 | 342,500 | 345,000 |
| B. | Total budgeted cost = (number of patrons × $5) + $300,000 | ? | ? | ? |
| C. | ? | Budget* | Actual | Variance |
| ? | Variable cost | $43,500 | $42,000 | $1,500 F |
| ? | Fixed cost | 300,000 | 307,500 | 7,500 U |
| ? | Total cost | $343,500 | $349,500 | $6,000 U |
| ? | * Variable budget = 8,700 patrons × $5 | ? | ? | ? |
The variances reveal that the orchestra exceeded its budget for 8,700 patrons by $6,000. The overall performance was not that bad, however, as the variances (individually and in total) are small in both dollar- and percentage-terms.
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