2. Ans: The activity variance is $ 215,480 which shows the difference in activity that has occurred
within the planned and flexible budget. Even though the activity variance shows an unfavorable
budgeting, it should not be affecting much in cost controlling of the year. The revenue and expense
variance is $2,620 and even though it is unfavorable i.e. the actual cost is greater than the flexible
budget, the variance is only 0.36% of the actual cost incurred. On top of that the variances also
show good management skills. Because the largest amount of unfavorable variances are in actors
and directors wages and in scenary, costumes and props and the favorable variances are theater
hall rent and printed programs. We can see that the large sum of unfavorable variances are used in
important activities for the set whereas reducing the rent and printed marketing is a good skill as
most people prefer other ways of marketing in present days esp. virtually Hence as a board of
director I would be satisfied with this year’s cost control.
3. Ans: Average cost per production or the average cost per performance produced by the cost
formula is not an accurate indication of the cost that will be incurred as a result of a new production
or a new performance. One particular production can be of extremely high budget with
professional actors and directors requiring high salaries where another production might require
lower budget with lesser costumes props and new actors or directors. The average costs will
estimate the cost of one production to be way lower than its actual cost whereas it will estimate
the other production’s cost to be way higher than it actually is. Hence, average cost per production
or performance will not be very accurate while estimating individual production’s or
performance’s cost.