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				$	4.10
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:

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.)

	Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Flexible Budget Planning Budget Pizzas 1,900 Deliveries 200 Revenue $29,130 Expenses: 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 Total expense 20,499 Net operating income $8,631

Answer 1

• All working forms part of the answer
• Variable cost will change with change in no. of course and students
• Requirement

Milano Pizza
Flexible Budget Performance Report
For the Month Ended November 30
	Actual Results			Flexible Budget			Planning Budget
Pizzas	1,900	0	None	1,900	100	Favourable	1,800
Deliveries	200	0	None	200	20	Unfavourable	220
Revenue	$                 29,130.00	$                       630.00	Favourable	$               28,500.00	$               1,500.00	Favourable	$      27,000.00
Expenses:
Pizza ingredients	$                    8,650.00	$                       860.00	Unfavourable	$                  7,790.00	$                  410.00	Unfavourable	$        7,380.00
Kitchen staff	$                    6,010.00	$                         60.00	Favourable	$                  6,070.00	$                            -	None	$       6,070.00
Utilities	$                       925.00	$                         45.00	Unfavourable	$                     880.00	$                     10.00	Unfavourable	$            870.00
Delivery person	$                       580.00	$                                -	None	$                     580.00	$                     58.00	Favourable	$            638.00
Delivery vehicle	$                    1,002.00	$                       168.00	Favourable	$                  1,170.00	$                     46.00	Favourable	$        1,216.00
Equipment depreciation	$                       464.00	$                                -	None	$                     464.00	$                            -	None	$            464.00
Rent	$                    2,030.00	$                                -	None	$                  2,030.00	$                            -	None	$        2,030.00
Miscellaneous	$                       838.00	$                         67.00	Favourable	$                     905.00	$                       5.00	Unfavourable	$            900.00
Total expense	$                 20,499.00	$                       610.00	Unfavourable	$               19,889.00	$                  321.00	Unfavourable	$      19,568.00
Net operating income	$                    8,631.00	$                         20.00	Favourable	$                  8,611.00	$               1,179.00	Favourable	$        7,432.00

• Formulas used to get the above Flexible and planning Budget data

	Actual Results	Flexible Budget	Planning Budget
Pizzas	1900	1900	1800
Deliveries	200	200	220
Revenue	29130	=1900*15	=1800*15
Expenses:
Pizza ingredients	8650	=1900*4.1	=1800*4.1
Kitchen staff	6010	6070	6070
Utilities	925	=690+(0.1*1900)	=690+(0.1*1800)
Delivery person	580	=2.9*200	=2.9*220
Delivery vehicle	1002	=710+(2.3*200)	=710+(2.3*220)
Equipment depreciation	464	464	464
Rent	2030	2030	2030
Miscellaneous	838	=810+(0.05*1900)	=810+(0.05*1800)