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.)

Homework Answers

Answer #1
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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