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 $ 4.70
Kitchen staff $ 5,970
Utilities $ 640 $ 0.60
Delivery person $ 3.40
Delivery vehicle $ 660 $ 1.80
Equipment depreciation $ 424
Rent $ 1,930
Miscellaneous $ 760 $ 0.06

  

In November, the pizzeria budgeted for 1,650 pizzas at an average selling price of $18 per pizza and for 250 deliveries.

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

  

Actual Results
Pizzas 1,750
Deliveries 230

Revenue $ 32,080
Pizza ingredients $ 7,750
Kitchen staff $ 5,910
Utilities $ 900
Delivery person $ 782
Delivery vehicle $ 992
Equipment depreciation $ 424
Rent $ 1,930
Miscellaneous $ 808

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

Planning budget
				1,650	250
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				4.7		7755
Kitchen staff			5,970			5,970
Utilities			640	0.6		1630
Delivery person					3.4	850
delivery vehicle			660		1.8	1110
Equipment depreciation			424			424
Rent			1,930			1,930
Miscellaneous			760	0.06		859
						20528
Flexible budget
				1,750	230
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				4.7		8225
Kitchen staff			5,970			5,970
Utilities			640	0.6		1690
Delivery person					3.4	782
delivery vehicle			660		1.8	1074
Equipment depreciation			424			424
Rent			1,930			1,930
Miscellaneous			760	0.06		865
						20960
		Flexible Budget Performance Report
		Actual results	Revenue & spending		Flexible	Activity variance		Planning
			Variaance		budget			Budget
Pizzas		1,750			1,750			1,650
Deliveries		230			230			250
Revenue		32,080	580	F	31500	1800	F	29700
Expenses:
pizza ingredients		7,750	475	F	8225	470	U	7755
Kitchen staff		5,910	60	F	5,970	0	N	5,970
Utilities		900	790	F	1690	60	U	1630
Delivery person		782	0	N	782	68	F	850
delivery vehicle		992	82	F	1074	36	F	1110
Equipment depreciation		424	0	N	424	0	N	424
Rent		1,930	0	N	1,930	0	N	1,930
Miscellaneous		808	57	F	865	6	U	859
total expense		19,496	1,464	F	20960	432	U	20528
net operating income		12,584	2,044	F	10540	1368	F	9172