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				$	4.70
Kitchen staff	$	5,970
Utilities	$	640		$	0.60
Delivery person							$	3.40
Delivery vehicle	$	660					$	1.80
Equipment depreciation	$	424
Rent	$	1,930
Miscellaneous	$	760		$	0.06

  

In November, the pizzeria budgeted for 1,650 pizzas at an average selling price of $18 per pizza and for 250 deliveries.

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

  

	Actual Results
Pizzas		1,750
Deliveries		230
Revenue	$	32,080
Pizza ingredients	$	7,750
Kitchen staff	$	5,910
Utilities	$	900
Delivery person	$	782
Delivery vehicle	$	992
Equipment depreciation	$	424
Rent	$	1,930
Miscellaneous	$	808

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November.

Answer 1

Milano Pizza
Flexible Budget Performance Report
For the month ended November 30
	Actual Results	Revenue and Spending Variance		Flexible Budget	Activity Variance		Planning Budget
Pizzas	1,750			1,750			1,650
Deliveries	230			230			250
Revenue	32,080	580	F	31,500	1,800	F	29,700
Expenses:
Pizza Ingreedient	7,750	475	F	8,225	470	U	7,755
Kitcchen Staff	5,910	60	F	5,970	-	None	5,970
Utilities	900	790	F	1,690	60	U	1,630
Delivery Person	782	-	None	782	68	F	850
Delivery veehcle	992	82	F	1,074	36	F	1,110
Depreciation	424	-	None	424	-	None	424
Rent	1,930	-	None	1,930	-	None	1,930
Misc.	808	57	F	865	6	U	859
Total Expense	19,496	1,464	F	20,960	432	U	20,528
Net Operating Income	12,584	2,044	F	10,540	1,368	F	9,172