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				$	4.00
Kitchen staff	$	6,050
Utilities	$	680		$	1.00
Delivery person							$	2.80
Delivery vehicle	$	700					$	2.20
Equipment depreciation	$	456
Rent	$	2,010
Miscellaneous	$	800		$	.20

In November, the pizzeria budgeted for 1,770 pizzas at an average selling price of $14 per pizza and for 210 deliveries. Data concerning the pizzeria’s operations in November appear below:

	Actual Results
Pizzas		1,870
Deliveries		190
Revenue	$	26,800
Pizza ingredients	$	8,470
Kitchen staff	$	5,990
Utilities	$	920
Delivery person	$	532
Delivery vehicle	$	1,000
Equipment depreciation	$	456
Rent	$	2,010
Miscellaneous	$	832

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 results	Revenue and spending variances		Flexible budget	Activity variances		Planning budget
Pizzas	1870			1870			1770
Deliveries	190			190			210
Revenue	26800	620	F	26180	1400	F	24780
Expenses:
Pizza ingredients	8470	990	U	7480	400	U	7080
Kitchen staff	5990	60	F	6050	0	None	6050
Utilities	920	1630	F	2550	100	U	2450
Delivery person	532	0	None	532	56	F	588
Delivery vehicle	1000	118	F	1118	44	F	1162
Equipment depreciation	456	0	None	456	0	None	456
Rent	2010	0	None	2010	0	None	2010
Miscellaneous	832	342	F	1174	20	U	1154
Total expense	20210	1160	F	21370	420	U	20950
Net operating income	6590	1780	F	4810	980	F	3830