Question

# Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as...

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.)

 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

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