1. Assuming that the theaters are profit centers, prepare aperformance report for the Park Theater using the chart below.Include a flexible budget. Determine the variances between actualresults, the flexible budget, and the master budget. (25points)
Actual Flexible Master
Results Variance Budget Variance Budget
Tickets sold 110,000 ( ) 120,000
Revenue–tickets $ 880,000 ( ) ( ) $ 840,000
Revenue–concessions 330,000 ( ) ( ) 480,000
Total revenue $1,210,000 ( ) $1,320,000
Controllable variable costs
Concessions 99,000 ( ) ( ) 120,000
Direct labor 330,000 ( ) ( ) 420,000
Variable overhead 550,000 ( ) ( ) 540,000
Contribution margin $ 231,000 ( ) ( ) $ 240,000
Controllable fixed costs
Rent 55,000 55,000
Other administrative expenses 50,000 ( ) 45,000
Theater operating income $ 126,000 ( ) ( ) $ 140,000
2. Evaluate Burgman’s performance as a manager. (25 points)
3. Assume that the managers are assigned responsibility for capitalexpenditures and that the theaters are thus investment centers.Park Theater is expected to generate a desired ROI of at least 6percent on average invested assets of $2,000,000.
a. Compute the theater’s return on investment and residual incomeusing the chart below. (25 points)
Actual Flexible Master
ROI ÷ ÷ ÷
= 0.00% = 0.00% = 0.00%
Residual income – ( 0% x ) – ( 0% x ) – ( 0% x )
= = =
b. Using the ROI and residual income, evaluate Burgman’sperformance as a manager. (25 points)
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