Question

Broadway theaters saw record attendance in the 2014 – 2015 season, with ticket sales up 7.3% over the prior season (“Theater Bars Are a Smash Hit on Broadway,” Wall Street Journal, December 28, 2015.) As a result, private hospitality companies who operate bars in Broadway theaters have experienced sales growth as well.

One such hospitality company is Sweet Hospitality Group, or SHG. SHG operates bars in more than 25 Broadway and off-Broadway theaters. The SHG bars offer a wide choice in wines, spirits, and beers. In addition, SHG employs a mixologist, Michael De Mono. De Mono will create show-themed cocktails, such as the Shadow Kiss for “The King and I.” The Shadow Kiss is a margarita flavored with green curry and pineapple. Another De Mono cocktail is the Almigh-tea for “The Book of Mormon.” The Almigh-tea is an iced tea with bourbon and a rhubarb liqueur.

SHG bars have also expanded to offer food. Choices might include artisanal cheese plates, Portobello mushroom sandwiches, beet and plantain chips, and other gourmet food options.

SHG employs actors and performers to staff the theater bars.

Questions

1. SHG is operating the bar at the New Amsterdam Theater on Broadway. The current show is Aladdin. List as many of each of the following costs as you can think might be incurred:
   1. Direct materials
   2. Direct labor
   3. Overhead
2. What period costs might SHG incur related to operating the 25 Broadway and off-Broadway bars? List as many period costs as you can imagine SHG might incur in a year.

Answer 1

Direct Material

1. Cost of purchasing wine

2. Cost of purchasing spirits

3. Cost of purchasing beers

4. Cost of acquiring other beverages like tequila etc

5. Cost of vegetables/ fruits like pineapple, lemon

6. Cost of cheese

7. Cost of chips and other snacks

8. Cost of breads

9. Other material cost for preparation of food

Direct Labor

1. Salary to performers

2. Salary to actors

3. Salary to mixologist

4. Salary to other staff directly attributable to operating the bar

Overheads

1. Electricity

2. Manufacturing supplies

3. Repairs and Maintenance Cost

4. Rent at New Amsterdam Theatre

5. Other cost directly attributable to operating the bar

6. Utilities expense

Period Cost

1. Office supplies

2. General administrative cost

3. Legal expense

4. Accounting expense

5. Selling expense

6. Taxes

7. Salary to sales and support functions

8. Marketing expense

9. Interest expense

10. Bad debt