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 Cost Cost per per Pizza Delivery per Month Pizza $4.70 ingredients Kitchen ataff $6,190 Utilities Delivery person 750 o.70 $3.50 Delivery vehicle $1.70 770 Equipment depreciation S 512 Rent $2,150 870 Miscellaneous $0.10 S In November, the pizzerla budgeted for 1,980 pizzas at an average selling price of $13 per pizza and for 200 dellveries Data concerning the pizzeria's actual results in November appear below: Actual Reaults 2,080 Pizzas Deliveries 180 $27,730 $ 9,730 $ 6,130 955 Revenue Pizza ingredients Kitchen staff Utilitie Delivery person Delivery vehicle Equipment depreciation Rent 630 $ 1,014 512 $2,150 Miscellaneous 874 Required: 1 Complete the flexible budget performance report that shows both revenue and spending varlances and activity variances for the pizzerla 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 alll amounts as positive values.)

Answer 1

Ans.	MILANO   PIZZA
	Flexible Budget Performance Report
	For the Month Ended November 30
		Actual Results	Revenue & Spending variance		Flexible budget	Volume variance		Planning Budget
	Pizzas	2,080			2,080			1,980
	Deliveries	180			180			200
	Revenue	$27,730	$690	F	$27,040	$1,300	F	$25,740
	Less: Expenses:
	Pizza ingredients	$9,730	$46	F	$9,776	$470	U	$9,306
	Kitchen staff	$6,130	$60	F	$6,190	$0	none	$6,190
	Utilities	$955	$1,251	F	$2,206	$70	U	$2,136
	Delivery person	$630	$0	none	$630	$70	F	$700
	Delivery vehicle	$1,014	$62	F	$1,076	$34	F	$1,110
	Equipment depreciation	$512	$0	none	$512	$0	none	$512
	Rent	$2,150	$0	none	$2,150	$0	none	$2,150
	Miscellaneous	$874	$204	F	$1,078	$10	U	$1,068
	Total expenses	$21,995	$1,623	F	$23,618	$446	U	$23,172
	Net operating income	$5,735	$2,313	F	$3,422	$854	F	$2,568
	*Calculations for Flexible budget & Planning budget:
		Flexible budget	Planning budget
	Pizzas	2,080	1,980
	Deliveries	180	200
	Revenue	2,080 * $13	1,980 * $13
	Less: Expenses:
	Pizza ingredients	2,080 * $4.70	1,980 * $4.70
	Kitchen staff	$6,190	$6,190
	Utilities	$750 + ($0.70 * 2,080)	$750 + ($0.70 * 1,980)
	Delivery person	$3.50 * 180	$3.50 * 200
	Delivery vehicle	$770 + ($1.70 * 180)	$770 + ($1.70 * 200)
	Equipment depreciation	$512	$512
	Rent	$2,150	$2,150
	Miscellaneous	$870 + ($0.10 * 2,080)	$870 + ($0.10 * 1,980)
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as master budget.
	Revenue & Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in expenses & decrease in revenue or net income from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses & increase in revenue or net income from flexible budget to actual results & Planning budget to flexible budget =   Favorable.