Question

In: Accounting

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as...

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.

Solutions

Expert Solution

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

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