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.

Data concerning the pizzeria’s costs appear below:

	Fixed Cost per Month			Cost per Pizza			Cost per Delivery
Pizza ingredients				$	4.80
Kitchen staff	$	5,990
Utilities	$	650		$	0.70
Delivery person							$	3.50
Delivery vehicle	$	670					$	1.90
Equipment depreciation	$	432
Rent	$	1,950
Miscellaneous	$	770		$	0.10

    

In November, the pizzeria budgeted for 1,680 pizzas at an average selling price of $19 per pizza and for 180 deliveries.

Data concerning the pizzeria’s operations in November appear below:

  

	Actual Results
Pizzas		1,780
Deliveries		160
Revenue	$	34,410
Pizza ingredients	$	7,930
Kitchen staff	$	5,930
Utilities	$	905
Delivery person	$	560
Delivery vehicle	$	994
Equipment depreciation	$	432
Rent	$	1,950
Miscellaneous	$	814

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

	Milano Pizza
	Flexible Budget Performance Report
	For the Month Ended November 30
	Actual Results	Revenue and spending variances		Flexible Budget	Activity variances		Planning Budget
Pizzas	1780			1780			1680
Deliveries	160			160			180
Revenue	34410	590	F	33820	1900	F	31920
Expenses:
Pizza ingredients	7930	614	F	8544	480	U	8064
Kitchen staff	5930	60	F	5990	0	None	5990
Utilities	905	991	F	1896	70	U	1826
Delivery person	560	0	None	560	70	F	630
Delivery vehicle	994	20	U	974	38	F	1012
Equipment depreciation	432	0	None	432	0	None	432
Rent	1950	0	None	1950	0	None	1950
Miscellaneous	814	134	F	948	10	U	938
Total expense	19515	1779	F	21294	452	U	20842
Net operating income	14895	2369	F	12526	1448	F	11078