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				$	4.30
Kitchen staff	$	5,890
Utilities	$	600		$	0.20
Delivery person							$	3.00
Delivery vehicle	$	620					$	1.40
Equipment depreciation	$	392
Rent	$	1,850
Miscellaneous	$	720		$	0.10

  

In November, the pizzeria budgeted for 1,530 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		1,630
Deliveries		190
Revenue	$	23,360
Pizza ingredients	$	7,030
Kitchen staff	$	5,830
Utilities	$	880
Delivery person	$	570
Delivery vehicle	$	984
Equipment depreciation	$	392
Rent	$	1,850
Miscellaneous	$	784

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
				1,530	210
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				4.3		6579
Kitchen staff			5,890			5,890
Utilities			600	0.2		906
Delivery person					3	630
delivery vehicle			620		1.4	914
Equipment depreciation			392			392
Rent			1,850			1,850
Miscellaneous			720	0.1		873
						18034
Flexible budget
				1,630	190
				cost	Cost per	amount
			fixed cost	per pizza	Delvery
pizza ingredients				4.3		7009
Kitchen staff			5,890			5,890
Utilities			600	0.2		926
Delivery person					3	570
delivery vehicle			620		1.4	886
Equipment depreciation			392			392
Rent			1,850			1,850
Miscellaneous			720	0.1		883
						18406
		Flexible Budget Performance Report
		Actual results	Revenue & spending		Flexible	Activity variance		Planning
			Variaance		budget			Budget
Pizzas		1,630			1,630			1,530
Deliveries		190			190			170
Revenue		23,360	540	F	22820	1400	F	21420
Expenses:
pizza ingredients		7,030	21	U	7009	430	U	6579
Kitchen staff		5,830	60	F	5,890	0	N	5,890
Utilities		880	46	F	926	20	U	906
Delivery person		570	0	N	570	60	F	630
delivery vehicle		984	98	U	886	28	F	914
Equipment depreciation		392	0	N	392	0	N	392
Rent		1,850	0	N	1,850	0	N	1,850
Miscellaneous		784	99	F	883	10	U	873
total expense		18,320	86	F	18406	372	U	18034
net operating income		5,040	626	F	4414	1028	F	3386