Question

Problem 9-20 More Than One Cost Driver [LO9-4, LO9-5]

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			$	3.80
Kitchen staff	$	5,220
Utilities	$	630	$	0.05
Delivery person					$	3.50
Delivery vehicle	$	540			$	1.50
Equipment depreciation	$	275
Rent	$	1,830
Miscellaneous	$	820	$	0.15

  

In November, the pizzeria budgeted for 1,200 pizzas at an average selling price of $13.50 per pizza and for 180 deliveries.

Data concerning the pizzeria’s operations in November appear below:

  

	Actual Results
Pizzas		1,240
Deliveries		174
Revenue	$	17,420
Pizza ingredients	$	4,985
Kitchen staff	$	5,281
Utilities	$	984
Delivery person	$	609
Delivery vehicle	$	655
Equipment depreciation	$	275
Rent	$	1,830
Miscellaneous	$	954

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

	Actual Results	Revenue & Spending Variance		Flexible Budget	Activity Variances		Planning Budget
Pizzas	1,240			1,240			1,200
Deliveries	174			174			180
Revenues	$                     17,420.00	$                                   680.00	Favourable	$                     16,740.00	$                                              540.00	Favourable	$                                                 16,200.00
Expenses:
Pizza Ingrediants	$                        4,985.00	$                                   273.00	Unfavourable	$                       4,712.00	$                                              152.00	Unfavourable	$                                                    4,560.00
kitchen Staff	$                        5,281.00	$                                     61.00	Unfavourable	$                       5,220.00	$                                                       -	None	$                                                    5,220.00
Utilities	$                           984.00	$                                   292.00	Unfavourable	$                           692.00	$                                                   2.00	Unfavourable	$                                                       690.00
Delivery Person	$                           609.00	$                                            -	None	$                           609.00	$                                                21.00	Favourable	$                                                       630.00
Delivery Vehicle	$                           655.00	$                                   146.00	Favourable	$                           801.00	$                                                   9.00	Favourable	$                                                       810.00
Equipment Depreciation	$                           275.00	$                                            -	None	$                           275.00	$                                                       -	None	$                                                       275.00
Rent	$                        1,830.00	$                                            -	None	$                       1,830.00	$                                                       -	None	$                                                    1,830.00
Miscellaneous	$                           954.00	$                                     52.00	Favourable	$                       1,006.00	$                                                   6.00	Unfavourable	$                                                    1,000.00
Total Expenses	$                     15,573.00	$                                   428.00	Unfavourable	$                     15,145.00	$                                              130.00	Unfavourable	$                                                 15,015.00
Net Operating Income	$                        1,847.00	$                                   252.00	Favourable	$                       1,595.00	$                                              410.00	Favourable	$                                                    1,185.00

--Working

	Actual Results	Flexible Budget	Planning Budget
Pizzas	1240	1240	1200
Deliveries	174	174	180
Revenues	17420	=1240*13.5	=1200*13.5
Expenses:
Pizza Ingrediants	4985	=1240*3.8	=1200*3.8
kitchen Staff	5281	5220	5220
Utilities	984	=630+(1240*0.05)	=630+(1200*0.05)
Delivery Person	609	=174*3.5	=180*3.5
Delivery Vehicle	655	=540+(174*1.5)	=540+(180*1.5)
Equipment Depreciation	275	275	275
Rent	1830	1830	1830
Miscellaneous	954	=820+(1240*0.15)	=820+(1200*0.15)