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				$	4.90
Kitchen staff	$	6,230
Utilities	$	770		$	0.90
Delivery person							$	2.70
Delivery vehicle	$	790					$	1.90
Equipment depreciation	$	528
Rent	$	2,190
Miscellaneous	$	890		$	0.20

  

In November, the pizzeria budgeted for 2,040 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		2,140
Deliveries		200
Revenue	$	32,810
Pizza ingredients	$	10,090
Kitchen staff	$	6,170
Utilities	$	965
Delivery person	$	540
Delivery vehicle	$	1,018
Equipment depreciation	$	528
Rent	$	2,190
Miscellaneous	$	886

Required:

1. Compute the revenue and spending 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

Milano Pizza
Flexible Budget Report
For the month ended November 30
		Actual results	Flexible Budget	Revenue and Spending Variances
Pizzas	x	2140	2140
Deliveries	y	200	200
Revenue	($15 * x)	$ 32,810	$      32,100	$           710	F
Expenses:
Pizza ingredients	($4.90 * x)	$ 10,090	$      10,486	$           396	F
Kitchen staff	$                    6,230	$   6,170	$         6,230	$              60	F
Utilities	[$770 + ($0.9 * x)]	$       965	$         2,696	$        1,731	F
Delivery Person	($2.70 * y)	$       540	$            540	$               0	None
Delivery Vehicle	[$790 + ($1.90 * y)]	$   1,018	$         1,170	$           152	F
Equipment depreciation	$                        528	$       528	$            528	$               0	None
Rent	$                    2,190	$   2,190	$         2,190	$               0	None
Miscellaneous	[$890 +( $0.20 * x)]	$       886	$         1,318	$           432	F
Total expense		$ 22,387	$      25,158	$        2,771	F
Net operating income		$ 10,423	$         6,942	$        3,481	F