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 $ 4.70 cost per Delivery $6,190 $ 750 $ 0.70 Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous $3.50 $1.70 $ 770 $ 512 $2,150 $ 870 $ 0.10

Answer 1

Solution Step 1: Prepare a flexible budget for Milano Pizza Milano Pizza Flexible Budget Pizzas Deliveries 2,080 180 $27,040 Revenue ($13 x 2,080) Expenses: Pizza ingredients ($4.70 x 2,080) Kitchen staff Utilities ($750 + $0.70 x 2,080) Delivery person ($3.50 x 180) Delivery vehicle ($770 +$1.70 x 180) Equipment depreciation Rent Miscellaneous ($870 + $0.10 x 2,080) Total expense Net operating income $9,776 $6,190 $2,206 $630 $1,076 $512 $2,150 $1,078 $23,618 $3,422 Step 2 : Compute the revenue and spending variances for the pizzeria Milano Pizza Revenue and Spending Variances For the Month Ended November 30 Actual Revenue and spending Results Variances 2,080 180 Flexible Budget 2,080 Pizzas Deliveries 1801 $27,7301 $27,040 Revenue Expenses Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous Total expense Net operating income $9,7301 $6,130 $955 $630 $1,014) $512 $2,1501 $874) $ 21,995 $5,735 $46 F $60 F $1,251 FT $0 None $62 F $0 None $0 None $204 F $1,623 FT $2,313 F1 $9,776 $6,190 $2,206 $630 $1,076 $512 $2,150 $1,078 $23,618 $3,422