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	$	6,190
Utilities	$	750		$	0.70
Delivery person							$	3.50
Delivery vehicle	$	770					$	1.70
Equipment depreciation	$	512
Rent	$	2,150
Miscellaneous	$	870		$	0.10

In November, the pizzeria budgeted for 1,980 pizzas at an average selling price of $13 per pizza and for 200 deliveries.

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

	Actual Results
Pizzas		2,080
Deliveries		180
Revenue	$	27,730
Pizza ingredients	$	9,730
Kitchen staff	$	6,130
Utilities	$	955
Delivery person	$	630
Delivery vehicle	$	1,014
Equipment depreciation	$	512
Rent	$	2,150
Miscellaneous	$	874

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

	Milano Pizza
	Flexible Budget Performance Report
	For the Month Ended November 30
	Actual Results	Revenue and spending variances		Flexible Budget	Activity variances		Planning Budget
Pizzas	2080			2080			1980
Deliveries	180			180			200
Revenue	27730	690	F	27040	1300	F	25740
Expenses:
Pizza ingredients	9730	46	F	9776	470	U	9306
Kitchen staff	6130	60	F	6190	0	None	6190
Utilities	955	1251	F	2206	70	U	2136
Delivery person	630	0	None	630	70	F	700
Delivery vehicle	1014	62	F	1076	34	F	1110
Equipment depreciation	512	0	None	512	0	None	512
Rent	2150	0	None	2150	0	None	2150
Miscellaneous	874	204	F	1078	10	U	1068
Total expense	21995	1623	F	23618	446	U	23172
Net operating income	5735	2313	F	3422	854	F	2568