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				$	4.00
Kitchen staff	$	6,050
Utilities	$	680		$	1.00
Delivery person							$	2.80
Delivery vehicle	$	700					$	2.20
Equipment depreciation	$	456
Rent	$	2,010
Miscellaneous	$	800		$	.20
In November, the pizzeria budgeted for 1,770 pizzas at an average selling price of $14 per pizza and for 210 deliveries. Data concerning the pizzeria’s operations in November appear below:    Actual Results Pizzas 1,870 Deliveries 190 Revenue $ 26,800 Pizza ingredients $ 8,470 Kitchen staff $ 5,990 Utilities $ 920 Delivery person $ 532 Delivery vehicle $ 1,000 Equipment depreciation $ 456 Rent $ 2,010 Miscellaneous $ 832 Actual Results   Revenue and Spending Variances Flexible Budget Activity Variances Planning Budget A B=A-C C D=C-E E Revenue $ 28,800.00 Expenses: Pizza Ingredients $    8,470.00 Kitchen Staff $    5,990.00 Utilities $        920.00 Delivery Person $        532.00 Delivery Vehicle $    1,000.00 Equipment Depreciation $        456.00 Rent $    2,010.00 Miscellaneous $        832.00 Net Operating Income $    6,590.00

Answer 1

Solution:

Flexible Budget Report

	Actual Results	Revenue and Spending Variances		Flexible Budget	Activity Variances		Planning Budget
	A	B=A-C		C	D=C-E		E
Revenue	$28,800	$2,620	F	$26,180	$1,400	F	$24,780
Expenses:
Pizza Ingredients	$8,470	$990	U	$7,480	$400	U	$7,080
Kitchen Staff	$5,990	$60	F	$6,050	$0	None	$6,050
Utilities	$920	$1,630	F	$2,550	$100	U	$2,450
Delivery Person	$532	$0	None	$532	$56	F	$588
Delivery Vehicle	$1,000	$118	F	$1,118	$44	F	$1,162
Equipment Depreciation	$456	$0	None	$456	$0	None	$456
Rent	$2,010	$0	None	$2,010	$0	None	$2,010
Miscellaneous	$832	$32	U	$800	$0	None	$800
Net Operating Income	$6,590	$1,406	F	$5,184	$1,000	F	$4,184

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