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				$	4.70
Kitchen staff	$	6,190
Utilities	$	750		$	0.70
Delivery person							$	3.50
Delivery vehicle	$	770					$	1.70
Equipment depreciation	$	512
Rent	$	2,150
Miscellaneous	$	870		$	0.10

  

In November, the pizzeria budgeted for 1,980 pizzas at an average selling price of $13 per pizza and for 200 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

  

	Actual Results
Pizzas		2,080
Deliveries		180
Revenue	$	27,730
Pizza ingredients	$	9,730
Kitchen staff	$	6,130
Utilities	$	955
Delivery person	$	630
Delivery vehicle	$	1,014
Equipment depreciation	$	512
Rent	$	2,150
Miscellaneous	$	874

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 2,080 Deliveries 180 Revenue $27,730 Expenses: Pizza ingredients 9,730 Kitchen staff 6,130 Utilities 955 Delivery person 630 Delivery vehicle 1,014 Equipment depreciation 512 Rent 2,150 Miscellaneous 874 Total expense 21,995 Net operating income $5,735

Answer 1

Answer-

MILANO PIZZA
Flexible Budget Performance Report
For the month ended November
	Revenue & Spending Variance	Activity Variance
Particulars	Variances	Remark	Variances	Remark
	$		$
Revenue	690	Favorable	1300	Favorable
Less:-Expenses
Pizza ingredients	46	Favorable	-470	Unfavorable
Kitchen staff	60	Favorable	0	None
Utilities	1251	Favorable	-70	Unfavorable
Delivery person	0	None	70	Favorable
Delivery vehicle	62	Unfavorable	34	Favorable
Equipment	0	None	0	None
Rent	0	None	0	None
Miscellaneous	204	Favorable	-10	Unfavorable
Total Expenses	1623	Favorable	-446	Unfavorable
Income from operations	2313	Favorable	854	Favorable

Explanation-

MILANO PIZZA
Revenue & Spending Variances
For the month ended November
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	2080 pizzas*$13 per pizza	27040	27730	690	Favorable
Less:-Expenses
	2080 pizzas*$4.70 per pizza	9776	9730	46	Favorable
Kitchen staff		6190	6130	60	Favorable
Utilities	$750+(2080 pizzas*$0.70 per pizza)	2206	955	1251	Favorable
Delivery person	180 deliveries*$3.50 per delivery	630	630	0	None
Delivery vehicle	$770+(180 deliveries*$1.70 per delivery)	1076	1014	62	Unfavorable
Equipment depreciation		512	512	0	None
Rent		2150	2150	0	None
Miscellaneous	$870+(2080 pizzas*$0.10 per pizza)	1078	874	204	Favorable
Total expenses		23618	21995	1623	Favorable
Income from opreations		3422	5735	2313	Favorable

MILANO PIZZA
Activity Variance
For the month ended November
Particulars	Flexible Budget	Planning Budget	Variances	Remark
		$	$
Revenue	2080 pizzas*$13 per pizza= $27040	1980 pizzas*$13 per pizza= $25740	1300	Favorable
Less:-Expenses
Pizza ingredients	2080 pizzas*$4.70 per pizza =$9776	1980 pizzas*$4.70 per pizza =$9306	-470	Unfavorable
Kitchen staff	$6190	$6190	0	None
Utilities	$750+(2080 pizzas*$0.70 per pizza)=$2206	$750+(1980 pizzas*$0.70 per pizza)=$2136	-70	Unfavorable
Delivery person	180 deliveries*$3.50 per delivery= $630	200 deliveries*$3.50 per delivery= $700	70	Favorable
Delivery vehicle	$770+(180 deliveries*$1.70 per delivery) =$1076	$770+(200 deliveries*$1.70 per delivery) =$1110	34	Favorable
Equipment	$512	$512	0	None
Rent	$2150	$2150	0	None
Miscellaneous	$870+(2080 pizzas*$0.10 per pizza)=$1078	$870+(1980 pizzas*$0.10 per pizza)=$1068	-10	Unfavorable
Total Expenses	23618	23172	-446	Unfavorable
Income from operations	3422	2568	854	Favorable