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				$	4.80
Kitchen staff	$	6,210
Utilities	$	760		$	0.80
Delivery person							$	2.60
Delivery vehicle	$	780					$	1.80
Equipment depreciation	$	520
Rent	$	2,170
Miscellaneous	$	880		$	0.20

  

In November, the pizzeria budgeted for 2,010 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		2,110
Deliveries		190
Revenue	$	30,240
Pizza ingredients	$	9,910
Kitchen staff	$	6,150
Utilities	$	960
Delivery person	$	494
Delivery vehicle	$	1,016
Equipment depreciation	$	520
Rent	$	2,170
Miscellaneous	$	880

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

	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	2110			2110			2010
Deliveries	190			190			210
Revenue	30240	700	F	29540	1400	F	28140
Expenses:
Pizza ingredients	9910	218	F	10128	480	U	9648
Kitchen staff	6150	60	F	6210	0	None	6210
Utilities	960	1488	F	2448	80	U	2368
Delivery person	494	0	None	494	52	F	546
Delivery vehicle	1016	106	F	1122	36	F	1158
Equipment depreciation	520	0	None	520	0	None	520
Rent	2170	0	None	2170	0	None	2170
Miscellaneous	880	422	F	1302	20	U	1282
Total expense	22100	2294	F	24394	492	U	23902
Net operating income	8140	2994	F	5146	908	F	4238