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. Data concerning the pizzeria's costs appear below: Fixed Cost per Month Cost per Pizza $ 4.80 Cost per Delivery 6,210 760 $ 80 Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous on on $ $ 2.60 1.80 780 520 2,170 880 $ 20 In November, the pizzeria budgeted for 2,010 pizzas at an average selling price of $14 per pizza a for 210 deliveries. Data concerning the pizzeria's operations in November appear below: Actual Results Pizzas 2.110 Deliveries 190 Revenue $30,240 Pizza ingredients $ 9,910 Kitchen staff $ 6,150 Utilities $ 960 Delivery person $ 494 Delivery vehicle $ 1,016 Equipment depreciation$ 520 Rent $ 2,170 Miscellaneous $ 880 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

Answer:

Milano Pizza
Flexible Budget Performance Report
For the Month Ended November 30
	Actual Results	Revenue and Spending Variances		Flexible Budget	Activity Variance		Planning Budget
Revenue	$ 30,240	$        700	F	$ 29,540	$    1,400	F	$ 28,140
Expenses:
Pizza ingredients	$    9,910	$        218	F	$ 10,128	$        480	U	$    9,648
Kitchen staff	$    6,150	$          60	F	$    6,210	$           -	None	$    6,210
Utilities	$        960	$    1,488	F	$    2,448	$          80	U	$    2,368
Delivery person	$        494	$           -	None	$        494	$          52	F	$        546
Delivery vehicle	$    1,016	$        106	F	$    1,122	$          36	F	$    1,158
Equipment depreciation	$        520	$           -	None	$        520	$           -	None	$        520
Rent	$    2,170	$           -	None	$    2,170	$           -	None	$    2,170
Miscellaneous	$        880	$        422	F	$    1,302	$          20	U	$    1,282
Total expense	$ 22,100	$    2,294		$ 24,394	$        492	U	$ 23,902
Net operating income	$    8,140	$    2,994	F	$    5,146	$        908	F	$    4,238

Revenue and Spending Variances = Flexible budget - Actual results

Activity variance = Flexible budget - Planning budget

If Revenues and Net incomes are more then Favorable otherwise Unfavorable

If Expenses are lower then Favorable otherwise Unfavorable

Calculations:

Flexible budget:

Flexible Budget
	Fixed Cost per month	Cost of 2,110 Pizzas	Cost of 190 Deliveries	Total
Revenue (i)				$ 29,540
Expenses:
Pizza ingredients		$ 10,128		$ 10,128
Kitchen staff	$       6,210			$    6,210
Utilities	$           760	$    1,688		$    2,448
Delivery person			$      494	$        494
Delivery vehicle	$           780		$      342	$    1,122
Equipment depreciation	$           520			$        520
Rent	$       2,170			$    2,170
Miscellaneous	$           880	$        422		$    1,302
Total Expenses (ii)				$ 24,394
Net income (i-ii)				$    5,146

Cost of pizza = 2,110 actual pizzas x Budgeted Cost per pizza

Cost of Deliveries = 190 actual deliveries x Budgeted cost per delivery

Planning Budget:

Planning Budget
	Fixed Cost per month	Cost of 2,010 Pizza	Cost of 210 Deliveries	Total
Revenue (i)				$ 28,140
Expenses:
Pizza ingredients		$ 9,648		$    9,648
Kitchen staff	$             6,210			$    6,210
Utilities	$                 760	$ 1,608		$    2,368
Delivery person			$      546	$        546
Delivery vehicle	$                 780		$      378	$    1,158
Equipment depreciation	$                 520			$        520
Rent	$             2,170			$    2,170
Miscellaneous	$                 880	$      402		$    1,282
Total Expenses (ii)				$ 23,902
Net income (i-ii)				$    4,238

Cost of pizza = 2,010 Budgeted pizzas x Budgeted Cost per pizza

Cost of Deliveries = 210 Budgeted deliveries x Budgeted cost per delivery