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.

Data concerning the pizzeria’s costs 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 operations 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. 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	1660			1660			1560
Deliveries	200			200			220
Revenue	25450	550	F	24900	1500	F	23400
Expenses:
Pizza ingredients	7210	94	F	7304	440	U	6864
Kitchen staff	5850	60	F	5910	0	None	5910
Utilities	885	223	F	1108	30	U	1078
Delivery person	620	0	None	620	62	F	682
Delivery vehicle	986	56	U	930	30	F	960
Equipment depreciation	400	0	None	400	0	None	400
Rent	1870	0	None	1870	0	None	1870
Miscellaneous	790	189	F	979	15	U	964
Total expense	18611	510	F	19121	393	U	18728
Net operating income	6839	1060	F	5779	1107	F	4672