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				$	4.30
Kitchen staff	$	6,110
Utilities	$	710		$	0.30
Delivery person							$	3.10
Delivery vehicle	$	730					$	1.30
Equipment depreciation	$	480
Rent	$	2,070
Miscellaneous	$	830		$	0.15

  

In November, the pizzeria budgeted for 1,860 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		1,960
Deliveries		220
Revenue	$	33,970
Pizza ingredients	$	9,010
Kitchen staff	$	6,050
Utilities	$	935
Delivery person	$	682
Delivery vehicle	$	1,006
Equipment depreciation	$	480
Rent	$	2,070
Miscellaneous	$	850

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	1960			1960
Deliveries	220			220
Revenue	33970	650	F	33320
Expenses:
Pizza ingredients	9010	582	U	8428
Kitchen staff	6050	60	F	6110
Utilities	935	363	F	1298
Delivery person	682	0	None	682
Delivery vehicle	1006	10	F	1016
Equipment depreciation	480	0	None	480
Rent	2070	0	None	2070
Miscellaneous	850	274	F	1124
Total expense	21083	125	F	21208
Net operating income	12887	775	F	12112