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 $ 5.00 Kitchen staff $ 6,250 Utilities $ 780 $ 1.00 Delivery person $ 2.80 Delivery vehicle $ 800 $ 2.00 Equipment depreciation $ 536 Rent $ 2,210 Miscellaneous $ 900 $ 0.10 In November, the pizzeria budgeted for 2,070 pizzas at an average selling price of $16 per pizza and for 230 deliveries. Data concerning the pizzeria’s actual results in November appear below: Actual Results Pizzas 2,170 Deliveries 210 Revenue $ 35,440 Pizza ingredients $ 10,270 Kitchen staff $ 6,190 Utilities $ 970 Delivery person $ 588 Delivery vehicle $ 1,020 Equipment depreciation $ 536 Rent $ 2,210 Miscellaneous $ 892 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

	Actual	Revenue and spending variance		Flexible budget	Activity variance		Planning budget
Pizzas	2170			2170			2070
Deliveries	210			210			230
Revenue	35440	720	F	34720	1600	F	33120
Expenses
Pizza ingredients	10270	580	F	10850	500	U	10350
Kitchen staff	6190	60	F	6250	0	None	6250
Utilities	970	1980	F	2950	100	U	2850
Delivery person	588	0	None	588	56	F	644
Delivery vehicle	1020	200	F	1220	40	F	1260
Equipment depreciation	536	0	None	536	0	None	536
Rent	2210	0	None	2210	0	None	2210
Miscellaneous	892	225	F	1117	10	U	1107
Total expenses	22676	3045	F	25721	514	U	25207
Net operating income	12764	3765	F	8999	1086	F	7913