Question

Question 2 ch 10

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				$	4.90
Kitchen staff	$	6,230
Utilities	$	770		$	0.90
Delivery person							$	2.70
Delivery vehicle	$	790					$	1.90
Equipment depreciation	$	528
Rent	$	2,190
Miscellaneous	$	890		$	0.20

    

In November, the pizzeria budgeted for 2,040 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		2,140
Deliveries		200
Revenue	$	32,810
Pizza ingredients	$	10,090
Kitchen staff	$	6,170
Utilities	$	965
Delivery person	$	540
Delivery vehicle	$	1,018
Equipment depreciation	$	528
Rent	$	2,190
Miscellaneous	$	886

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

• Requirement, as asked

	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Pizzas	2,140			2,140			2,040
Deliveries	200			200			220
Revenues	$                     32,810.00	$                                   710.00	Favourable	$                     32,100.00	$                                          1,500.00	Favourable	$                                                 30,600.00
Expenses:
Pizza Ingrediants	$                     10,090.00	$                                   396.00	Favourable	$                     10,486.00	$                                              490.00	Unfavourable	$                                                    9,996.00
kitchen Staff	$                        6,170.00	$                                     60.00	Favourable	$                       6,230.00	$                                                       -	None	$                                                    6,230.00
Utilities	$                           965.00	$                               1,731.00	Favourable	$                       2,696.00	$                                                90.00	Unfavourable	$                                                    2,606.00
Delivery Person	$                           540.00	$                                            -	None	$                           540.00	$                                                54.00	Favourable	$                                                       594.00
Delivery Vehicle	$                        1,018.00	$                                   152.00	Favourable	$                       1,170.00	$                                               38.00	Favourable	$                                                    1,208.00
Equipment Depreciation	$                           528.00	$                                            -	None	$                           528.00	$                                                       -	None	$                                                       528.00
Rent	$                        2,190.00	$                                            -	None	$                       2,190.00	$                                                       -	None	$                                                    2,190.00
Miscellaneous	$                           886.00	$                                   432.00	Favourable	$                       1,318.00	$                                                20.00	Unfavourable	$                                                    1,298.00
Total Expenses	$                     22,387.00	$                               2,771.00	Favourable	$                     25,158.00	$                                              508.00	Unfavourable	$                                                 24,650.00
Net Operating Income	$                     10,423.00	$                               3,481.00	Favourable	$                       6,942.00	$                                              992.00	Favourable	$                                                    5,950.00

• Working

	Actual Results	Flexible Budget	Planning Budget
Pizzas	2140	2140	2040
Deliveries	200	200	220
Revenues	32810	=2140*15	=2040*15
Expenses:
Pizza Ingrediants	10090	=2140*4.9	=2040*4.9
kitchen Staff	6170	6230	6230
Utilities	965	=770+(2140*0.9)	=770+(2040*0.9)
Delivery Person	540	=200*2.7	=220*2.7
Delivery Vehicle	1018	=790+(200*1.9)	=790+(220*1.9)
Equipment Depreciation	528	528	528
Rent	2190	2190	2190
Miscellaneous	886	=890+(2140*0.2)	=890+(2040*0.2)