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			Cost per Delivery
Pizza ingredients				$	4.50
Kitchen staff	$	6,150
Utilities	$	730		$	.50
Delivery person							$	3.30
Delivery vehicle	$	750					$	1.50
Equipment depreciation	$	496
Rent	$	2,110
Miscellaneous	$	850		$	.25

    

In November, the pizzeria budgeted for 1,920 pizzas at an average selling price of $19 per pizza and for 180 deliveries.

Data concerning the pizzeria’s operations in November appear below:

  

	Actual Results
Pizzas		2,020
Deliveries		160
Revenue	$	39,050
Pizza ingredients	$	9,370
Kitchen staff	$	6,090
Utilities	$	945
Delivery person	$	528
Delivery vehicle	$	1,010
Equipment depreciation	$	496
Rent	$	2,110
Miscellaneous	$	862

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:

Millano Pizza
Flexible Budget Performance Report
For the Month Ended November 30
	Actual			Flexible			Planning
Pizzas	2020			2020			1920
Deliveries	160			160			180
Revenues	$39,050	$670	F	$38,380	$1,900	F	$36,480
Expenses:
Pizz ingredients	$9,370	$280	U	$9,090	$1,410	U	$7,680
Kitchen staff	$6,090	$60	F	$6,150	$0	None	$6,150
Utilities	$945	$795	F	$1,740	$50	U	$1,690
Delivery person	$528	$0	None	$528	$66	F	$594
Delivery vehicle	$1,010	$20	U	$990	$30	F	$1,020
Equipment depreciation	$496	$0	None	$496	$0	None	$496
Rent	$2,110	$0	None	$2,110	$0	None	$2,110
Miscellaneous	$862	$493	F	$1,355	$25	U	$1,330
Total Expenses	$21,411	$1,048	F	$22,459	$1,389	U	$21,070
Net Operating income	$17,639	$1,718	F	$15,921	$511	F	$15,410

Calculations:

Budgeted
	Variable cost for pizza			Variable cost for delivery			Fixed costs (iii)	Total (i+ii+iii)
	Pizzas	Unit cost	Total (i)	Deliveries	Unit cost	Total (ii)
Revenues	1,920	$19	$36,480					$36,480
Pizz ingredients	1,920	$4.00	$7,680	180		$0		$7,680
Kitchen staff	1,920		$0	180		$0	$6,150	$6,150
Utilities	1,920	$0.50	$960	180		$0	$730	$1,690
Delivery person	1,920		$0	180	$3.30	$594		$594
Delivery vehicle	1,920		$0	180	$1.50	$270	$750	$1,020
Equipment depreciation	1,920		$0	180		$0	$496	$496
Rent	1,920		$0	180		$0	$2,110	$2,110
Miscellaneous	1,920	$0.25	$480	180		$0	$850	$1,330
Flexible
	Variable cost for pizza			Variable cost for delivery			Fixed costs (iii)	Total (i+ii+iii)
	Pizzas	Unit cost	Total(i)	Deliveries	Unit cost	Total (ii)
Revenues	2,020	$19.00	$38,380					$38,380
Pizz ingredients	2,020	$4.50	$9,090	160		$0		$9,090
Kitchen staff	2,020		$0	160		$0	$6,150	$6,150
Utilities	2,020	$0.50	$1,010	160		$0	$730	$1,740
Delivery person	2,020		$0	160	$3.30	$528		$528
Delivery vehicle	2,020		$0	160	$1.50	$240	$750	$990
Equipment depreciation	2,020		$0	160		$0	$496	$496
Rent	2,020		$0	160		$0	$2,110	$2,110
Miscellaneous	2,020	$0.25	$505	160		$0	$850	$1,355