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				$	4.60
Kitchen staff	$	5,950
Utilities	$	630		$	0.50
Delivery person							$	3.30
Delivery vehicle	$	650					$	1.70
Equipment depreciation	$	416
Rent	$	1,910
Miscellaneous	$	750		$	0.25

  

In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

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

  

	Actual Results
Pizzas		1,720
Deliveries		220
Revenue	$	29,810
Pizza ingredients	$	7,570
Kitchen staff	$	5,890
Utilities	$	895
Delivery person	$	726
Delivery vehicle	$	990
Equipment depreciation	$	416
Rent	$	1,910
Miscellaneous	$	802

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

	Actual Results	Flexible Budget	Variance [A-B]
Revenue	29810	1720*17=29240	570 F
less:cost
Pizza ingredients	7570	1720*4.6=7912	342 F
Kitchen staff	5890	5950	60 F
Utilities	895	[1720*.50]+630=1490	595 F
Delivery person	726	220*3.3=726	0 no effect/None
Delivery vehicle	990	220*1.7=374	616 U
Equipment depreciation	416	416	0 no effect/None
Rent	1910	1910	0 no effect/None
Miscellaneous	802	[1720*.25]+750 = 1180	378 F
Total cost	19199	19958	759 F
Net income /(loss)	10611	9282	1329 F