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				$	4.10
Kitchen staff	$	6,290
Utilities	$	800		$	0.20
Delivery person							$	3.00
Delivery vehicle	$	820					$	2.20
Equipment depreciation	$	552
Rent	$	2,250
Miscellaneous	$	920		$	0.10

  

In November, the pizzeria budgeted for 2,130 pizzas at an average selling price of $18 per pizza and for 250 deliveries.

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

  

	Actual Results
Pizzas		2,230
Deliveries		230
Revenue	$	40,880
Pizza ingredients	$	10,630
Kitchen staff	$	6,230
Utilities	$	980
Delivery person	$	690
Delivery vehicle	$	1,024
Equipment depreciation	$	552
Rent	$	2,250
Miscellaneous	$	904

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.)

Answer 1

Flexible budget performance Report
	Actual Results			Flexible budgets			Planning budget
Pizzas	2230			2230			2130
Deliveries	230			230			250
Revenue	40880	740	F	40140	1800	F	38340
Expenses:
Pizza Ingredients	10630	1487	U	9143	410	U	8733
Kitchen staff	6230	60	F	6290	0	None	6290
Utilities	980	266	F	1246	20	U	1226
Delivery person	690	0	None	690	60	F	750
Delivery Vehicle	1024	302	U	1326	44	F	1370
Equipment Depreciation	552	0	None	552	0	None	552
Rent	2250	0	None	2250	0	None	2250
Miscellaneous	904	239	F	1143	10	U	1133
Total expenses	23260	620	U	22640	336	U	22304
Net operating Income	17620	120	F	17500	1464	F	16036