Question

# Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as...

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 \$ 4.10 Kitchen staff \$ 6,290 Utilities \$ 800 \$ 0.20 Delivery person \$ 3.00 Delivery vehicle \$ 820 \$ 2.20 Equipment depreciation \$ 552 Rent \$ 2,250 Miscellaneous \$ 920 \$ 0.10

In November, the pizzeria budgeted for 2,130 pizzas at an average selling price of \$18 per pizza and for 250 deliveries.

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

 Actual Results Pizzas 2,230 Deliveries 230 Revenue \$ 40,880 Pizza ingredients \$ 10,630 Kitchen staff \$ 6,230 Utilities \$ 980 Delivery person \$ 690 Delivery vehicle \$ 1,024 Equipment depreciation \$ 552 Rent \$ 2,250 Miscellaneous \$ 904

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.)

 Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Revenue and spending variances Flexible Budget Pizzas 2230 2230 Deliveries 230 230 Revenue 40880 740 F 40140 Expenses: Pizza ingredients 10630 1487 U 9143 Kitchen staff 6230 60 F 6290 Utilities 980 266 F 1246 Delivery person 690 0 None 690 Delivery vehicle 1024 302 F 1326 Equipment depreciation 552 0 None 552 Rent 2250 0 None 2250 Miscellaneous 904 239 F 1143 Total expense 23260 620 U 22640 Net operating income 17620 120 F 17500

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