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				$	4.30
Kitchen staff	$	6,110
Utilities	$	710		$	0.30
Delivery person							$	3.10
Delivery vehicle	$	730					$	1.30
Equipment depreciation	$	480
Rent	$	2,070
Miscellaneous	$	830		$	0.15

  

In November, the pizzeria budgeted for 1,860 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

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

  

	Actual Results
Pizzas		1,960
Deliveries		220
Revenue	$	33,970
Pizza ingredients	$	9,010
Kitchen staff	$	6,050
Utilities	$	935
Delivery person	$	682
Delivery vehicle	$	1,006
Equipment depreciation	$	480
Rent	$	2,070
Miscellaneous	$	850

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.)

	Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Flexible Budget Planning Budget Pizzas 1,960 Deliveries 220 Revenue $33,970 Expenses: Pizza ingredients 9,010 Kitchen staff 6,050 Utilities 935 Delivery person 682 Delivery vehicle 1,006 Equipment depreciation 480 Rent 2,070 Miscellaneous 850 Total expense 21,083 Net operating income $12,887

Answer 1

Answer-

MILANO PIZZA
Flexible Budget Performance Report
For the month ended November 30
	Revenue & Spending Variance	Activity Variance
Particulars	Variances	Remark	Variances	Remark
	$		$
Revenue	650	Favorable	1700	Favorable
Less:-Expenses
Pizza ingredients	-582	Unfavorable	-430	Unfavorable
Kitchen staff	60	Favorable	0	None
Utilities	363	Favorable	-30	Unfavorable
Delivery person	0	None	62	Favorable
Delivery vehicle	10	Favorable	26	Favorable
Equipment	0	None	0	None
Rent	0	None	0	None
Miscellaneous	274	Favorable	-15	Unfavorable
Total Expenses	125	Favorable	-387	Unfavorable
Income from operations	775	Favorable	1313	Favorable

Explanation-

MILANO PIZZA
Revenue & Spending Variances
For the month ended November
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	1960 pizzas*$17 per pizza	33320	33970	650	Favorable
Less:-Expenses
Pizza ingrediants	1960 pizzas*$4.30 per pizza	8428	9010	-582	Unfavorable
Kitchen staff		6110	6050	60	Favorable
Utilities	$710+(1960 pizzas*$0.30 per pizza)	1298	935	363	Favorable
Delivery person	220 deliveries*$3.10 per delivery	682	682	0	None
Delivery vehicle	$730+(220 deliveries*$1.30 per delivery)	1016	1006	10	Favorable
Equipment		480	480	0	None
Rent		2070	2070	0	None
Miscellaneous	$830+(1960 pizzas*$0.15 per pizza)	1124	850	274	Favorable
Total expenses		21208	21083	125	Favorable
Income from opreations		12112	12887	775	Favorable

MILANO PIZZA
Activity Variance
For the month ended November
Particulars	Flexible Budget	Planning Budget	Variances	Remark
		$	$
Revenue	1960 pizzas*$17 per pizza =33320	1860 pizzas*$17 per pizza = 31620	1700	Favorable
Less:-Expenses
Pizza ingredients	1960 pizzas*$4.30 per pizza= 8428	1860 pizzas*$4.30 per pizza= 7998	-430	Unfavorable
Kitchen staff	6110	6110	0	None
Utilities	$710+(1960 pizzas*$0.30 per pizza) =1298	$710+(1860 pizzas*$0.30 per pizza) =1268	-30	Unfavorable
Delivery person	220 deliveries*$3.10 per delivery=682	240 deliveries*$3.10 per delivery=744	62	Favorable
Delivery vehicle	$730+(220 deliveries*$1.30 per delivery) =1016	$730+(240 deliveries*$1.30 per delivery) =1042	26	Favorable
Equipment	480	480	0	None
Rent	2070	2070	0	None
Miscellaneous	$830+(1960 pizzas*$0.15 per pizza)=1124	$830+(1860 pizzas*$0.15 per pizza)=1109	-15	Unfavorable
Total Expenses	21208	20821	-387	Unfavorable
Income from operations	12112	10799	1313	Favorable