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				$	4.00
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		$	0.20

  

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 actual results 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

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

Planning budget
				1,770	210
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				4		7080
Kitchen staff			6,050			6,050
Utilities			680	1		2450
Delivery person					2.8	588
delivery vehicle			700		2.2	1162
Equipment depreciation			456			456
Rent			2,010			2,010
Miscellaneous			800	0.2		1154
						20950
Flexible budget
				1,870	190
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				4		7480
Kitchen staff			6,050			6,050
Utilities			680	1		2550
Delivery person					2.8	532
delivery vehicle			700		2.2	1118
Equipment depreciation			456			456
Rent			2,010			2,010
Miscellaneous			800	0.2		1174
						21370
		Flexible Budget Performance Report
		Actual results	Revenue & spending		Flexible	Activity variance		Planning
			Variaance		budget			Budget
Pizzas		1,870			1,870			1,770
Deliveries		190			190			210
Revenue		26,800	620	F	26180	1400	F	24780
Expenses:
pizza ingredients		8,470	990	U	7480	400	U	7080
Kitchen staff		5,990	60	F	6,050	0	N	6,050
Utilities		920	1,630	F	2550	100	U	2450
Delivery person		532	0	N	532	56	F	588
delivery vehicle		1,000	118	F	1118	44	F	1162
Equipment depreciation		456	0	N	456	0	N	456
Rent		2,010	0	N	2,010	0	N	2,010
Miscellaneous		832	342	F	1174	20	U	1154
total expense		20,210	1,160	F	21370	420	U	20950
net operating income		6,590	1,780	F	4810	980	F	3830