Case Study: Page 22.Leo’s Four-Plex Theater was a single-location, four-screen theater located in a small town in west Texas.
Leo Antonelli bought the theater a year ago and hiredBill Reilly, his nephew, to manage it. Leo was concerned,however, because the theater was not as profi table as hehad thought it would be. He suspected the theater hadsome control problems and asked Park Cockerill, anaccounting professor at a college in the adjacent town,to study the situation and provide suggestions.Park found the following:1. Customers purchased their tickets at one of twoticket booths located at the front of the theater. The
theater used general admission (not assigned) seat-ing. The tickets were color coded to indicate which
movie the customer wanted to see. The tickets werealso dated and stamped “good on day of sale only.”The tickets at each price (adult, child, matinee,evening) were prenumbered serially, so that thenumber of tickets sold each day at each price foreach movie could be determined by subtracting the
number of the first ticket sold from the endingnumber.2. The amounts of cash collected were counted dailyand compared with the total value of tickets sold. Thecash counts revealed, almost invariably, less cashthan the amounts that should have been collected.The discrepancies were usually small, less than $10per cashier. However, on one day two weeks beforePark’s study, one cashier was short by almost $100.3. Just inside the theater’s front doors was a lobby with arefreshment stand. Park observed the refreshmentstand’s operations for a while. He noted that most of thestand’s attendants were young, probably of high school
or college age. They seemed to know many of the cus-tomers, a majority of whom were of similar ages, which
was not surprising given the theater’s small-town loca-tion. But the familiarity concerned Park because he had
also observed several occasions where the stand’s
attendants either failed to collect cash from the custom-ers or failed to ring up the sale on the cash register.
CASE STUDYLeo’s Four-Plex Theater
Private Fitness, Inc.
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4. Customers entered the screening rooms by passingthrough a turnstile manned by an attendant whoseparated the ticket and placed part of it in a locked‘stub box.’ Test counts of customers entering andleaving the theater did not reconcile either with thenumber of ticket sales or the stub counts.Park found evidence of two specifi c problems. First,he found a few tickets of the wrong color or with thewrong dates in the ticket stub boxes. And second, hefound a sometimes signifi cant number of free theater
passes with Bill Reilly’s signature on them. Theseproblems did not account for all of the customer testcount discrepancies, however. Park suspected that theticket collectors might also be admitting friends whohad not purchased tickets, although his observationsprovided no direct evidence of this.When his study was complete, Park sat down andwondered whether he could give Leo suggestions thatwould address all the actual and potential problems,yet not be too costly.-------------------------------------------------------------------------------------------------------------------------------Answer the following Questions:1. Where is the theater’s control system lacking? Are the controls themselves weak or
incomplete, or are the theater’s problems caused primarily because of lack of discipline in using the existing controls?
2. What control improvements would you suggest for Leo’s Four-Plex?