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	$	6,170
Utilities	$	740		$	0.60
Delivery person							$	3.40
Delivery vehicle	$	760					$	1.60
Equipment depreciation	$	504
Rent	$	2,130
Miscellaneous	$	860		$	0.20

  

In November, the pizzeria budgeted for 1,950 pizzas at an average selling price of $20 per pizza and for 190 deliveries.

Data concerning the pizzeria’s actual results in November were as follows:

  

	Actual Results
Pizzas		2,050
Deliveries		170
Revenue	$	41,680
Pizza ingredients	$	9,550
Kitchen staff	$	6,110
Utilities	$	950
Delivery person	$	578
Delivery vehicle	$	1,012
Equipment depreciation	$	504
Rent	$	2,130
Miscellaneous	$	868

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.)

Milano Pizza
Flexible Budget Performance Report
For the Month Ended November 30
	Actual Results	Activity Variances		Flexible Budget	Revenue and Spending Variances		Planning Budget
Pizzas	2,050
Deliveries	170
Revenue	$41,680
Expenses:
Pizza ingredients	9,550
Kitchen staff	6,110
Utilities	950
Delivery person	578
Delivery vehicle	1,012
Equipment depreciation	504
Rent	2,130
Miscellaneous	868
Total expense	21,702			0			0
Net operating income	$19,978			$0			$0

Answer 1