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				$	4.40
Kitchen staff	$	5,910
Utilities	$	610		$	0.30
Delivery person							$	3.10
Delivery vehicle	$	630					$	1.50
Equipment depreciation	$	400
Rent	$	1,870
Miscellaneous	$	730		$	0.15

  

In November, the pizzeria budgeted for 1,560 pizzas at an average selling price of $15 per pizza and for 220 deliveries.

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

  

	Actual Results
Pizzas		1,660
Deliveries		200
Revenue	$	25,450
Pizza ingredients	$	7,210
Kitchen staff	$	5,850
Utilities	$	885
Delivery person	$	620
Delivery vehicle	$	986
Equipment depreciation	$	400
Rent	$	1,870
Miscellaneous	$	790

Required:

1. Compute the revenue and spending 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

Milano Pizza
Flexible Budget Report
For the month ended November 30
		Actual results	Flexible Budget	Revenue and Spending Variances
Pizzas	x	1660	1660
Deliveries	y	200	200
Revenue	($15 * x)	$ 25,450	$      24,900	$           550	F
Expenses:
Pizza ingredients	($4.40 * x)	$   7,210	$         7,304	$              94	F
Kitchen staff	$                    5,910	$   5,850	$         5,910	$              60	F
Utilities	[$610 + ($0.3 * x)]	$       885	$         1,108	$           223	F
Delivery Person	($3.10 * y)	$       620	$            620	$               0	None
Delivery Vehicle	[$630 + ($1.50 * y)]	$       986	$            930	$              56	U
Equipment depreciation	$                        400	$       400	$            400	$              0	None
Rent	$                    1,870	$   1,870	$         1,870	$               0	None
Miscellaneous	[$730 +( $0.15 * x)]	$       790	$            979	$           189	F
Total expense		$ 18,611	$      19,121	$           510	F
Net operating income		$   6,839	$         5,779	$        1,060	F