Using managerial accounting information to manage a Broadway production (Learning Objectives 1 and 2)
REAL LIFE
The Shubert Organization operates 20 theaters, including 17 on Broadway. It has brought hundreds of shows to Broadway over the decades, including The Phantom of the Opera, Cats, and Les Miserables. Several of its shows have been in the news in recent years including:
Mamma Mia!
The Broadway musical Mamma Mia! moved from the Winter Garden Theatre to the Broadhurst Theatre, both of which are on Broadway in New York City. Mamma Mia! will save up to $100,000 per week18 in operating costs due to the Broadhurst’s smaller size; the Broadhurst seats 1,160, while the Winter Garden seats 1,530. Theatre experts estimate the show’s weekly costs to be approximately $600,000 to $700,000, and its weekly ticket sales are usually in the mid-to high-six-figure range.18 ‘“Mamma Mia!’ to Move,” The New York Times, April 18, 2013, retrieved from http://artsbeat.blogs.nytimes.com/2013/04/18/mamma-mia-to-move/ on July 1, 2013.
Once
Once is a Tony Award–winning show on Broadway also produced by the Shubert Organization. Once is a musical about an Irish musician and a Czech immigrant who are drawn together by their shared love of music. Once opened on Broadway in March 2012. The show earned back the amount that the Shubert Organization had invested in it after just 21 weeks (169 performances).19 The show continues its run on Broadway. 19 http://evamere.com/screen-to-stage-musical-transfer-once-recoups-in-record-time/
Memphis
Another Shubert-produced musical, Memphis, is loosely based on the story of a Memphis disc jockey (DJ) who was one of the first white DJs to play black music in the 1950s. Memphis was composed by David Bryan, the keyboard player of the band Bon Jovi. The show opened on Broadway in the Shubert Theatre in October 2009 and won several awards, including four Tony Awards. The Shubert Organization had planned to run Memphis through November 2012, but closed the show in August 2012 because ticket revenues could not support the longer run. Instead of finding another show to use the Shubert Theatre between August 2012 and April 2013, when the show Matilda was scheduled to open, the Shubert Organization decided to use the time to renovate the theater.
Questions
- 1. For each show that the Shubert Organization produces, what type of financial accounting information would be generated or recorded?
- 2. What information would producers of Mamma Mia! have needed to make the decision to move the show to a different theatre? What information would be provided by the financial accounting system? What information would be provided by the
management accounting system? - 3. What information would the producers of Once have needed to calculate that the original investment of the show had been earned? What information would producers need to decide to keep the show open? What information would be provided by the financial accounting system? What information would be provided by the management accounting system?
- 4. What information would the producers of Memphis have needed to decide to close the show early? What information would the Shubert Organization management have needed to decide to renovate the theater rather than produce another show after Memphis closed its run? What information would be provided by the financial accounting system? What information would be provided by the management accounting system?
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Managerial Accounting (5th Edition)
- Sara has just taken a job as the middle school assistant principal for an area school district. Prior to Chis, she was a teacher. She has received the following performance measurements for her first administrative job. Her first order of business is to determine if these performance measurements are short-term goals or long-term goals based on her individual situation. She has completed her administrative degree but has not yet worked as an administrator. Identify each of the following goals as short term or long term. A. Conduct teacher walk-throughs/observations/evaluations for teachers of grades 6 and 7. B. Assist the districts mission in seeking to educate all youth in the school district. C. Train to become a building instructional leader. Act as building administrator in the absence of the principal. D. Attend meetings with building principals and the administrative team when called to do so. E. Engage all students in a meaningful way, and support teachers and staff in providing rigor and relevance. Success of school-wide discipline and attendance policies and enforcement depends on a combination of creativity and sound pedagogy while adhering to district, state, and federal law, guidelines, and regulations. F. Facilitate and supervise all federal- and state-mandated drills (fire, lockdowns, tornado, others). G. Dress professionally. H. Assist the building principal in all job duties and responsibilities.arrow_forwardForty years ago, Vinfen was founded as a nonprofit company by psychiatrists and social workers at the Massachusetts Mental Health Center and Harvard Medical School to help people with psychiatric conditions transition to group homes for community living. Vinfens strategy map for fiscal 2006 shows how it is building from its mission to accelerating organizational learning and elevating agency performance through its balanced scorecard perspectives to bring value to the customer supported by operational excellence. The following are elements in the balanced scorecard and the four key perspectives. Match the elements with the correct perspectives.arrow_forwardEach of the following scenarios requires the use of accounting information to carry out one or more of the following managerial activities: (1) planning, (2) control and evaluation, (3) continuous improvement, or (4) decision making. a. MANAGER: At the last board meeting, we established an objective of earning an after-tax profit equal to 20 percent of sales. I need to know the revenue that we need to earn in order to meet this objective, given that we have 250,000 to spend on the promotional campaign. Once I have estimated sales in units, we then need to outline a promotional campaign that conforms to our budget and that will take us where we want to be. However, to compute the targeted sales revenue, I need to know the unit sales price, the unit variable cost, and the associated fixed production and support costs. I also need to know the tax rate. b. MANAGER: We have problems with our procurement process. Our accounts payable department is spending 80 percent of its time resolving discrepancies between the purchase order, receiving order, and suppliers invoice. Incorrect part numbers on the purchase orders, incorrect quantities ordered, and wrong parts sent (or the incorrect quantity) are just a few examples of sources of discrepancies. A complete redesign of the process has been suggested, which will allow us to eliminate virtually all of the errors and, at the same time, significantly reduce the number of clerks needed in purchasing, receiving, and accounts payable. This redesign promises to significantly reduce costs, decrease lead time, and increase customer satisfaction. c. MANAGER: This overhead cost report indicates that we have spent significantly more on inspection, purchasing, and production than was budgeted. An investigation has revealed that the source of the problem is faulty components from suppliers. A supplier evaluation has revealed that by selecting five suppliers with the best quality records (out of 15 currently used), the number of defective components will be dramatically reduced, thus producing significant overhead savings by reducing the demand for inspections, reordering, and rework. d. MANAGER: A large local firm has approached me and has offered to sell us one of the components used in our small enginesa component that we are currently producing internally. I need to know costs that we would avoid if this component is purchased so that I can assess the economic merits of this offer. e. MANAGER: Currently, our deluxe lawn mower is losing money. We need to increase profits. I would like to know how much our profits would be if we reduce our variable costs by 50 per mower while maintaining our current sales volume. Also, marketing claims that if we increase advertising expenditures by 1,000,000 and cut prices by 15 percent, we can increase the number of mowers sold by 25 percent. I would like to know which approach offers the most profit, or if a combination of the approaches may be best. f. MANAGER: We are implementing a major quality improvement program. We will be increasing the investment in prevention and detection activities with the expectation of driving down both internal and external failure costs. I expect to see trend reports for all categories of quality costs. I want to see if improving quality really does reduce costs and improve profitability. g. MANAGER: Our engineering design department has proposed a new design for our product. The new design promises to reduce post-purchase costs and, as a consequence, increase market share. I need to know the cost of producing this new design because it uses some new components and requires some different manufacturing processes. I would then like to have a projected income statement based on the new market share and new production costs. The planned selling price will be the same, or maybe even 10 percent lower. Projections based on the two price scenarios would be needed. h. MANAGER: My engineers have said that by redesigning our two main production processes, we can reduce move time by 90 percent and wait time by 85 percent. This would decrease cycle time and virtually eliminate the need to carry finished goods inventories. On-time deliveries would also increase dramatically. This would produce cost savings of nearly 20,000,000 per year. Market share and revenues would also increase. Required: 1. Describe each of the four managerial responsibilities. 2. Identify the managerial activity or activities applicable for each scenario, and indicate the role of accounting information in the activity.arrow_forward
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- The Vintage Restaurant, on Captiva Island near Fort Myers, Florida, is owned and operated by Karen Payne. The restaurant just completed its third year of operation. During those three years, Karen sought to establish a reputation for the restaurant as a high-quality dining establishment that specializes in fresh seafood. Through the efforts of Karen and her staff, her restaurant has become one of the best and fastest-growing restaurants on the island. To better plan for future growth of the restaurant, Karen needs to develop a system that will enable her to forecast food and beverage sales by month for up to one year in advance. The following table shows the value of food and beverage sales (1,000s) for the first three years of operation: Managerial Report Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Karen that summarizes your findings, forecasts, and recommendations. Include the following: 1. A time series plot. Comment on the underlying pattern in the time series. 2. Using the dummy variable approach, forecast sales for January through December of the fourth year. How would you explain this model to Karen? Assume that January sales for the fourth year turn out to be 295,000. What was your forecast error? If this error is large, Karen may be puzzled about the difference between your forecast and the actual sales value. What can you do to resolve her uncertainty about the forecasting procedure?arrow_forwardMini Case Study Five years ago, Phil Davis left his position at a large company to start Integrated Solutions Co. (ISC), a software design company. ISC’s first product was a unique software package that seamlessly integrated networked PCs. Robust sales of this initial product permitted the company to begin development of other software products and to hire additional personnel. The staff at ISC quickly grew from three people working out of Davis’s basement to over 70 individuals working in leased spaces at an industrial park. Continued growth led Davis to hire seasoned marketing, distribution, and production managers and an experienced accountant, Jan Smith. Recently, Davis decided that the company had become too large to run on an informal basis and that a formalized planning and control program centered on a budget was necessary. Davis asked the accountant, Jan Smith, to work with him in developing the initial budget for ISC. Davis forecasted sales revenues based on his projections…arrow_forwardAssume you graduated from college with a major in marketing and took a job with a large consumer products company after three years you were laid off when the company downsized describe the steps you take to repackage yourself for another fieldarrow_forward
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