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				$	4.50
Kitchen staff	$	6,370
Utilities	$	840		$	0.60
Delivery person							$	3.40
Delivery vehicle	$	860					$	1.50
Equipment depreciation	$	584
Rent	$	2,330
Miscellaneous	$	960		$	0.10

  

In November, the pizzeria budgeted for 2,250 pizzas at an average selling price of $22 per pizza and for 210 deliveries.

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

  

	Actual Results
Pizzas		2,350
Deliveries		190
Revenue	$	52,480
Pizza ingredients	$	11,350
Kitchen staff	$	6,310
Utilities	$	1,000
Delivery person	$	646
Delivery vehicle	$	1,032
Equipment depreciation	$	584
Rent	$	2,330
Miscellaneous	$	928

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November.

Answer 1

	Milano Pizza
	Flexible Budget Performance Report
	For the Month Ended November 30
	Actual Results	Revenue and spending variances		Flexible Budget	Activity variances		Planning Budget
Pizzas	2350			2350			2250
Deliveries	190			190			210
Revenue	52480	780	F	51700	2200	F	49500
Expenses:
Pizza ingredients	11350	775	U	10575	450	U	10125
Kitchen staff	6310	60	F	6370	0	None	6370
Utilities	1000	1250	F	2250	60	U	2190
Delivery person	646	0	None	646	68	F	714
Delivery vehicle	1032	113	F	1145	30	F	1175
Equipment depreciation	584	0	None	584	0	None	584
Rent	2330	0	None	2330	0	None	2330
Miscellaneous	928	267	F	1195	10	U	1185
Total expense	24180	915	F	25095	422	U	24673
Net operating income	28300	1695	F	26605	1778	F	24827