Part One: COST BEHAVIOR Ch 2 (26 points) Tom Graber has been elected to handle the local Community T

Part One: COST BEHAVIOR Ch 2 (26 points)

Tom Graber has been elected to handle the local Community Theater summer play. The theater is a nonprofit organization that produces theatrical performances in the area. The organization puts on three different productions each year Ac€?o one in March, one in July and one in October. The plays run for 4 weeks. Tom is trying to determine whether he should schedule two or three shows/week for this summerAc€?cs presentation of Godspell. He has developed the following cost estimates associated with the play:

Cost of printing notices will be a $60 set up fee plus $.50 per notice

Postage to mail notices will be $.30 each.

Cost of printing posters is $150 for a minimum purchase of 50 posters which is all that is needed.

Cost of building stage sets will be $1,215 per seasonal production.

Cost of printing 100-500 programs will be $250; 500 to 1,000 programs will be $400 and 1,000 to 2,000 will be $500.

Cost of security will be $110 per night plus $30 per hour; five hours will be needed each night.

Cost of cheesecake to be served at intermission Ac€?o one cake serves 10 people. The cost is $12/cake.   Cut cheesecake must be served the night of the performance. Only uncut cheesecake can be stored for later use. (All patrons attending receive cheesecake whether they are members or not.)

      A?·The theater can hold 150 people per performance. The cost of readying and operating the theater is $300/ night if the attendance is 120 people or less. The cost rises to $350/night if attendance is more than 120 people since additional seating must be set up in the balcony area.

One of the members owns the theatre building and rents it to the organization for $50 per week plus $2 per ticket sold.

      A?·Each member attending receives a complimentary beverage. The cost averages $2/person. (Only members receive the complimentary drink tickets.)

All the actors and crew members for the play volunteer their time for the plays.

The Community Theater has 1,400 members who provide continuing support for the organization through a small membership fee. All members receive a notice of the play and receive priority in buying tickets. After a specific deadline the tickets are made available to the general public. Ordinarily, about 960 of the members attend the summer offering. The plays are presented from 8 to 11 p.m. (Assume that attendance is spread evenly over the performances).

COST BEHAVIOR Ac€?o DIFFERENT ACTIVITY BASES

        1. Indicate the type of behavior (fixed, variable, step cost, mixed) exhibited by the above cost items. Explain why you classified the cost as you did.

Use number of members attending as the activity base. (Assume that attendance is spread evenly over the performances) (5 points)

        True

Fixed True

Variable

Step

Mixed

Explanation of Cost Behavior Classification

Costs of printing notices for members

Postage to mail the notices

Cost of printing posters

Cost of building stage sets

Cost of printing programs

Security

Cheesecake

Cost of readying the theater

Cost of renting the theater

Complimentary Beverage for members