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 per Cost per Delivery Pizza per Month Pizza ingredients 4.80 $5,990 650 Kitchen staff $ 0.70 Utilities Delivery person Delivery vehic le Equipment depreciation $3.50 $1.90 670 432 $1,950 Rent $ 0.10 Miscellaneous 770 In November, the pizzeria budgeted for 1,680 pizzas at an average selling price of $19 per pizza and for 180 deliveries. Data concerning the pizzeria's actual results in November appear below: Actual Results Pizzas 1,780 Deliveries 160 34,410 $ 7,930 $ 5,930 $ Revenue Pizza ingredients Kitchen staff Utilities 905

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	1,780			1,780			1,680
	Deliveries	160			160			180
	Revenue	$34,410	$590	F	$33,820	$1,900	F	$31,920
	Less: Expenses:
	Pizza ingredients	$7,930	$614	F	$8,544	$480	U	$8,064
	Kitchen staff	$5,930	$60	F	$5,990	$0	none	$5,990
	Utilities	$905	$991	F	$1,896	$70	U	$1,826
	Delivery person	$560	$0	none	$560	$70	F	$630
	Delivery vehicle	$994	$20	U	$974	$38	F	$1,012
	Equipment depreciation	$432	$0	none	$432	$0	none	$432
	Rent	$1,950	$0	none	$1,950	$0	none	$1,950
	Miscellaneous	$814	$134	F	$948	$10	U	$938
	Total expenses	$19,515	$1,779	F	$21,294	$452	U	$20,842
	Net operating income	$14,895	$2,369	F	$12,526	$1,448	F	$11,078
	*Calculations for Flexible budget & Planning budget:
		Flexible budget	Planning budget
	Pizzas	1,780	1,680
	Deliveries	160	180
	Revenue	1,780 * $19	1,680 * $19
	Less: Expenses:
	Pizza ingredients	1,780 * $4.80	1,680 * $4.80
	Kitchen staff	$5,990	$5,990
	Utilities	$650 + ($0.70 * 1,780)	$650 + ($0.70 * 1,680)
	Delivery person	$3.50 * 160	$3.50 * 160
	Delivery vehicle	$670 + ($1.90 * 160)	$670 + ($1.90 * 160)
	Equipment depreciation	$432	$432
	Rent	$1,950	$1,950
	Miscellaneous	$770 + ($0.10 * 1,780)	$770 + ($0.10 * 1,680)
	*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.