Question

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made. The pizzeria’s cost formulas appear below: Fixed Cost per Month Cost per Pizza Cost per Delivery Pizza ingredients $ 4.60 Kitchen staff $ 6,170 Utilities $ 740 $ 0.60 Delivery person $ 3.40 Delivery vehicle $ 760 $ 1.60 Equipment depreciation $ 504 Rent $ 2,130 Miscellaneous $ 860 $ 0.20 In November, the pizzeria budgeted for 1,950 pizzas at an average selling price of $20 per pizza and for 190 deliveries. Data concerning the pizzeria’s actual results in November appear below: Actual Results Pizzas 2,050 Deliveries 170 Revenue $ 41,680 Pizza ingredients $ 9,550 Kitchen staff $ 6,110 Utilities $ 950 Delivery person $ 578 Delivery vehicle $ 1,012 Equipment depreciation $ 504 Rent $ 2,130 Miscellaneous $ 868 Required: 1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Milano Pizza
Flexible Budget Performance Report
For the Month Ended November 30
	Actual Results	Revenue and Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Pizzas	2050			2050			1950
Deliveries	170			170			190
Revenue	$41680	(41680-41000)= $680	F	(2050*20)= $41000	(41000-39000)= 2000	F	(1950*20)= $39000
Expenses:
Pizza Ingredients	9550	(9550-9430)= 120	U	(2050*4.60)= 9430	(9430-8970)= 460	U	(1950*4.60)= 8970
Kitchen Staff	6110	(6110-6170)= 60	F	6170	0	NONE	6170
Utilities	950	(950-1970)= 1020	F	(740+0.60*2050)= 1970	(1970-1910)= 60	U	(740+0.60*1950)= 1910
Delivery person	578	0	NONE	(3.40*170)= 578	(578-646)= 68	F	(3.40*190)= 646
Delivery vehicle	1012	(1012-1032)= 20	F	(760+1.60*170)= 1032	(1032-1064)= 32	F	(760+1.60*190)= 1064
Equipment depreciation	504	0	NONE	504	0	NONE	504
Rent	2130	0	NONE	2130	0	NONE	2130
Miscellaneous	868	(868-1270)= 402	F	(860+0.20*2050)= 1270	(1270-1250)= 20	U	(860+0.20*1950)= 1250
Total expense	21702	1382	F	23084	440	U	22644
Net operating expense	$19978	2062	F	$17916	1560	F	$16356