Question

chapter9 1

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				$	4.60
Kitchen staff	$	5,950
Utilities	$	630		$	0.50
Delivery person							$	3.30
Delivery vehicle	$	650					$	1.70
Equipment depreciation	$	416
Rent	$	1,910
Miscellaneous	$	750		$	0.25

  

In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

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

  

	Actual Results
Pizzas		1,720
Deliveries		220
Revenue	$	29,810
Pizza ingredients	$	7,570
Kitchen staff	$	5,890
Utilities	$	895
Delivery person	$	726
Delivery vehicle	$	990
Equipment depreciation	$	416
Rent	$	1,910
Miscellaneous	$	802

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

Answer-1)-

MILANO PIZZA
Revenue & Spending Variances
For the month ended November
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	1720 pizzas*$17 per pizza	29240	29810	570	Favorable
Less:-Expenses
Pizza ingredients	1720 pizzas*$4.60 per pizza	7912	7570	342	Favorable
Kitchen staff		5950	5890	60	Favorable
Utilities	$630+(1720 pizzas*$0.50 per pizza)	1490	895	595	Favorable
Delivery person	220 deliveries*$3.30 per delivery	726	726	0	None
Delivery vehicle	$650+(220 deliveries*$1.70 per delivery)	1024	990	34	Favorable
Equipment		416	416	0	None
Rent		1910	1910	0	None
Miscellaneous	$750+(1720 pizzas*$0.25 per pizza)	1180	802	378	Favorable
Total expenses		20608	19199	1409	Favorable
Income from operations		8632	10611	1979	Favorable