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				$	4.40
Kitchen staff	$	6,130
Utilities	$	720		$	0.40
Delivery person							$	3.20
Delivery vehicle	$	740					$	1.40
Equipment depreciation	$	488
Rent	$	2,090
Miscellaneous	$	840		$	0.20

  

In November, the pizzeria budgeted for 1,890 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		1,990
Deliveries		230
Revenue	$	36,480
Pizza ingredients	$	9,190
Kitchen staff	$	6,070
Utilities	$	940
Delivery person	$	736
Delivery vehicle	$	1,008
Equipment depreciation	$	488
Rent	$	2,090
Miscellaneous	$	856

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

	Milano Pizza
	Flexible Budget Performance Report
	For the Month Ended November 30
	Actual Results	Revenue and spending variances		Flexible Budget
Pizzas	1990			1990
Deliveries	230			230
Revenue	36480	660	F	35820
Expenses:
Pizza ingredients	9190	434	U	8756
Kitchen staff	6070	60	F	6130
Utilities	940	576	F	1516
Delivery person	736	0	None	736
Delivery vehicle	1008	54	F	1062
Equipment depreciation	488	0	None	488
Rent	2090	0	None	2090
Miscellaneous	856	382	F	1238
Total expense	21378	638	F	22016
Net operating income	15102	1298	F	13804