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				$	4.40
Kitchen staff	$	6,350
Utilities	$	830		$	0.50
Delivery person							$	3.30
Delivery vehicle	$	850					$	1.40
Equipment depreciation	$	576
Rent	$	2,310
Miscellaneous	$	950		$	0.25

  

In November, the pizzeria budgeted for 2,220 pizzas at an average selling price of $21 per pizza and for 200 deliveries.

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

  

	Actual Results
Pizzas		2,320
Deliveries		180
Revenue	$	49,490
Pizza ingredients	$	11,170
Kitchen staff	$	6,290
Utilities	$	995
Delivery person	$	594
Delivery vehicle	$	1,030
Equipment depreciation	$	576
Rent	$	2,310
Miscellaneous	$	922

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	2320			2320			2220
Deliveries	180			180			200
Revenue	49490	770	F	48720	2100	F	46620
Expenses:
Pizza ingredients	11170	962	U	10208	440	U	9768
Kitchen staff	6290	60	F	6350	0	None	6350
Utilities	995	995	F	1990	50	U	1940
Delivery person	594	0	None	594	66	F	660
Delivery vehicle	1030	72	F	1102	28	F	1130
Equipment depreciation	576	0	None	576	0	None	576
Rent	2310	0	None	2310	0	None	2310
Miscellaneous	922	608	F	1530	25	U	1505
Total expense	23887	773	F	24660	421	U	24239
Net operating income	25603	1543	F	24060	1679	F	22381