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			Cost per Delivery
Pizza ingredients				$	4.30
Kitchen staff	$	6,110
Utilities	$	710		$	0.30
Delivery person							$	3.10
Delivery vehicle	$	730					$	1.30
Equipment depreciation	$	480
Rent	$	2,070
Miscellaneous	$	830		$	0.15

  

In November, the pizzeria budgeted for 1,860 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

  

	Actual Results
Pizzas		1,960
Deliveries		220
Revenue	$	33,970
Pizza ingredients	$	9,010
Kitchen staff	$	6,050
Utilities	$	935
Delivery person	$	682
Delivery vehicle	$	1,006
Equipment depreciation	$	480
Rent	$	2,070
Miscellaneous	$	850

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.

Flexible Budget Performance Report For the Month Ended November 30 Actual Results Flexible Planning Budget Budget Pizzas 1,960 Deliveries 220 $ 33,970 Revenue Expenses: Pizza ingredients 9,010 6,050 Kitchen staff 935 Utilities Delivery person 682 Delivery vehicle 1,006 Equipment depreciation 480 Rent 2,070 Miscellaneous 850 Total expense 21,083 Net operating income $ 12,887

Answer 1

Answer

	Actual Results	Revenue & Spending Variance		Flexible Budget	Activity Variances			Planning Budget
Pizzas	1,960			1,960			1,860
Deliveries	220			220			240
Revenues	$                     33,970.00	$                                   650.00	Favourable	$                     33,320.00	$                                          1,700.00	Favourable	$                                                 31,620.00
Expenses:
Pizza Ingrediants	$                        9,010.00	$                                   582.00	Unfavourable	$                       8,428.00	$                                              430.00	Unfavourable	$                                                    7,998.00
kitchen Staff	$                        6,050.00	$                                     60.00	Favourable	$                       6,110.00	$                                                       -	None	$                                                    6,110.00
Utilities	$                           935.00	$                                   363.00	Favourable	$                       1,298.00	$                                                30.00	Unfavourable	$                                                    1,268.00
Delivery Person	$                           682.00	$                                            -	None	$                           682.00	$                                                62.00	Favourable	$                                                      744.00
Delivery Vehicle	$                        1,006.00	$                                     10.00	Favourable	$                       1,016.00	$                                                26.00	Favourable	$                                                    1,042.00
Equipment Depreciation	$                           480.00	$                                            -	None	$                           480.00	$                                                       -	None	$                                                       480.00
Rent	$                        2,070.00	$                                            -	None	$                       2,070.00	$                                                       -	None	$                                                    2,070.00
Miscellaneous	$                           850.00	$                                   274.00	Favourable	$                       1,124.00	$                                                15.00	Unfavourable	$                                                    1,109.00
Total Expenses	$                     21,083.00	$                                   125.00	Favourable	$                     21,208.00	$                                              387.00	Unfavourable	$                                                 20,821.00
Net Operating Income	$                     12,887.00	$                                   775.00	Favourable	$                     12,112.00	$                                          1,313.00	Favourable	$                                                 10,799.00

--Working

	Actual Results	Flexible Budget	Planning Budget
Pizzas	1960	1960	1860
Deliveries	220	220	240
Revenues	33970	=1960*17	=1860*17
Expenses:
Pizza Ingrediants	9010	=1960*4.3	=1860*4.3
kitchen Staff	6050	6110	6110
Utilities	935	=710+(1960*0.3)	=710+(1860*0.3)
Delivery Person	682	=220*3.1	=240*3.1
Delivery Vehicle	1006	=730+(220*1.3)	=730+(240*1.3)
Equipment Depreciation	480	480	480
Rent	2070	2070	2070
Miscellaneous	850	=830+(1960*0.15)	=830+(1860*0.15)