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				$	5.00
Kitchen staff	$	6,250
Utilities	$	780		$	1.00
Delivery person							$	2.80
Delivery vehicle	$	800					$	2.00
Equipment depreciation	$	536
Rent	$	2,210
Miscellaneous	$	900		$	0.10

  

In November, the pizzeria budgeted for 2,070 pizzas at an average selling price of $16 per pizza and for 230 deliveries.

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

  

	Actual Results
Pizzas		2,170
Deliveries		210
Revenue	$	35,440
Pizza ingredients	$	10,270
Kitchen staff	$	6,190
Utilities	$	970
Delivery person	$	588
Delivery vehicle	$	1,020
Equipment depreciation	$	536
Rent	$	2,210
Miscellaneous	$	892

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November.

Answer 1

Planning budget
				2,070	230
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				5		10350
Kitchen staff			6,250			6,250
Utilities			780	1		2850
Delivery person					2.8	644
delivery vehicle			800		2	1260
Equipment depreciation			536			536
Rent			2,210			2,210
Miscellaneous			900	0.1		1107
						25207
Flexible budget
				2,170	210
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				5		10850
Kitchen staff			6,250			6,250
Utilities			780	1		2950
Delivery person					2.8	588
delivery vehicle			800		2	1220
Equipment depreciation			536			536
Rent			2,210			2,210
Miscellaneous			900	0.1		1117
						25721
		Flexible Budget Performance Report
		Actual results	Revenue & spending		Flexible	Activity variance		Planning
			Variaance		budget			Budget
Pizzas		2,170			2,170			2,070
Deliveries		210			210			230
Revenue		35,440	720	F	34720	1600	F	33120
Expenses:
pizza ingredients		10,270	580	F	10850	500	U	10350
Kitchen staff		6,190	60	F	6,250	0	N	6,250
Utilities		970	1,980	F	2950	100	U	2850
Delivery person		588	0	N	588	56	F	644
delivery vehicle		1,020	200	F	1220	40	F	1260
Equipment depreciation		536	0	N	536	0	N	536
Rent		2,210	0	N	2,210	0	N	2,210
Miscellaneous		892	225	F	1117	10	U	1107
total expense		22,676	3,045	F	25721	514	U	25207
net operating income		12,764	3,765	F	8999	1086	F	7913