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				$	4.80
Kitchen staff	$	5,990
Utilities	$	650		$	0.70
Delivery person							$	3.50
Delivery vehicle	$	670					$	1.90
Equipment depreciation	$	432
Rent	$	1,950
Miscellaneous	$	770		$	0.10

  

In November, the pizzeria budgeted for 1,680 pizzas at an average selling price of $19 per pizza and for 180 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

  

	Actual Results
Pizzas		1,780
Deliveries		160
Revenue	$	34,410
Pizza ingredients	$	7,930
Kitchen staff	$	5,930
Utilities	$	905
Delivery person	$	560
Delivery vehicle	$	994
Equipment depreciation	$	432
Rent	$	1,950
Miscellaneous	$	814

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

• All working forms part of the answer
• Requirement 1

	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Pizzas	1,780			1,780			1,680
Deliveries	160			160			180
Revenues	$                     34,410.00	$                                   590.00	Favourable	$                     33,820.00	$                                          1,900.00	Favourable	$                                                 31,920.00
Expenses:
Pizza Ingrediants	$                        7,930.00	$                                   614.00	Favourable	$                       8,544.00	$                                              480.00	Unfavourable	$                                                    8,064.00
kitchen Staff	$                        5,930.00	$                                     60.00	Favourable	$                       5,990.00	$                                                       -	None	$                                                    5,990.00
Utilities	$                           905.00	$                                   991.00	Favourable	$                       1,896.00	$                                                70.00	Unfavourable	$                                                    1,826.00
Delivery Person	$                           560.00	$                                            -	None	$                           560.00	$                                                70.00	Favourable	$                                                       630.00
Delivery Vehicle	$                           994.00	$                                     20.00	Unfavourable	$                           974.00	$                                                38.00	Favourable	$                                                    1,012.00
Equipment Depreciation	$                           432.00	$                                            -	None	$                           432.00	$                                                       -	None	$                                                       432.00
Rent	$                        1,950.00	$                                            -	None	$                       1,950.00	$                                                       -	None	$                                                    1,950.00
Miscellaneous	$                           814.00	$                                   134.00	Favourable	$                           948.00	$                                                10.00	Unfavourable	$                                                       938.00
Total Expenses	$                     19,515.00	$                               1,779.00	Favourable	$                     21,294.00	$                                              452.00	Unfavourable	$                                                 20,842.00
Net Operating Income	$                     14,895.00	$                               2,369.00	Favourable	$                     12,526.00	$                                          1,448.00	Favourable	$                                                 11,078.00

• Working for Budget datas

	Actual Results	Flexible Budget	Planning Budget
Pizzas	1780	1780	1680
Deliveries	160	160	180
Revenues	34410	=1780*19	=1680*19
Expenses:
Pizza Ingrediants	7930	=1780*4.8	=1680*4.8
kitchen Staff	5930	5990	5990
Utilities	905	=+(1780*0.7)+650	=+(1680*0.7)+650
Delivery Person	560	=160*3.5	=180*3.5
Delivery Vehicle	994	=+(160*1.9)+670	=+(180*1.9)+670
Equipment Depreciation	432	432	432
Rent	1950	1950	1950
Miscellaneous	814	=+(1780*0.1)+770	=+(1680*0.1)+770