Question

Case 13-4 Objectives of the master budget Domino's Pizza LLC operates pizza delivery and carryout restaurants. The annual report de scribes its business as follows: We offer a focused menu of high-quality, value priced pizza with three types of crust (Hand-Tossed, Thin Crust, and Deep Dish), along with buffalo wings, bread sticks, cheesy bread, CinnaStix®, and Coca Cola® products. Our hand-tossed pizza is made from fresh dough produced in our regional distribution centers. We prepare every pizza using real cheese, pizza sauce made from fresh tomatoes, and a choice of high-quality meat and vegetable toppings in generous portions. Our focused menu and use of premium ingredients enable us to consistently and efficiently produce the highest-quality pizza. Over the 41 years since our founding, we have developed a simple, cost-efficient model. We offer a limited menu, our stores are designed for delivery and carry-out, and we do not generally offer dine-in service. As a result, our stores require relatively small, lower-rent locations and limited capital expenditures. How would a master budget support planning, directing, and control for Domino's?

Answer 1

• A master budget is a central planning tool that the management uses to direct its activities and have a control on its various departments. It is mandatory for the senior management to review the performance of the corporation.
• Domino's would be able to manage the operations of pizzas if it uses a master budget of operations consistently with sales budget which helps as a planning tool. This is because there would not be any finished goods inventory of baked pizzas that would be stored for the next period.
• A sales budget would manage cost incurred in manufacturing and selling of pizzas like raw materials used, cost of dough, packaging, fuel costs for delivery, salaries etc. This budget helps in directing its activities.
• The overhead costs is more based on the number of restaurants than the number of pizzas sold. This is because the number of restaurants adds to the cost of management by salaries, rent, utilities abd other overhead costs. The overhead budget helps in controlling its various restaurants. Though, the delivery drivers own the delivery vehicles, the depreciation and maintenance cost of vehicles are not included in Domino's overhead budget.