Question

Alibaba 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				$	4.10
Kitchen staff	$	6,070
Utilities	$	690		$	0.10
Delivery person							$	2.90
Delivery vehicle	$	710					$	2.30
Equipment depreciation	$	464
Rent	$	2,030
Miscellaneous	$	810		$	0.05

In November, the pizzeria budgeted for 1,800 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		1,900
Deliveries		200
Revenue	$	29,130
Pizza ingredients	$	8,650
Kitchen staff	$	6,010
Utilities	$	925
Delivery person	$	580
Delivery vehicle	$	1,002
Equipment depreciation	$	464
Rent	$	2,030
Miscellaneous	$	838

Required:

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

Correct Answer:

Alibaba Pizza
Flexible Budget Performance Report
For the Month Ended November 30
	Actual Results	Revenue and spending variance		Flexible Budget
Pizzas	1,900	0	None	1,900
Deliveries	200	0	None	200
Revenue	$ 29,130	$ 630	favourable	$    28,500
Expenses:
Pizza ingredients	$    8,650	$ 860	Unfavorable	$      7,790
Kitchen staff	$    6,010	$   (60)	favourable	$      6,070
Utilities	$        925	$    45	Unfavorable	$          880
Delivery person	$        580	$    -	None	$          580
Delivery vehicle	$    1,002	$ (168)	favourable	$      1,170
Equipment depreciation	$        464	$    -	None	$          464
Rent	$    2,030	$    -	None	$      2,030
Miscellaneous	$        838	$   (67)	favourable	$          905
Total expense	$ 20,499	$ 610	Unfavorable	$    19,889
Net operating income	$    8,631	$    20	favourable	$      8,611

End of answer.

Thanks.