Question

Problem 9 - 20 - Saved to this PC Search Review View Help yout References Mailings Аәвьсеба Аавьсера Аавьсс Аавьссс Аав Title Find se Replac Select Editing 1 Normal Heading 2 1 No Spac. Heading 1 5 Paragraph Styles Problem 9 - 20 Problem 9 - 20: More than One Cost Driver 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 driver - the number of pizzas sold and the number of deliveries made. Data concerning the pizzeria's costs appear below: Fixed Cost Cost Per Cost Per Per Month Pizza Delivery Pizza Ingredients $3.80 Kitchen Staff S5,220 Utilities S630 $0.05 Delivery Person $3.50 Delivery Vehicle S540 $1.50 Equipment Depreciation $275 Rent $1,830 Miscellaneous 5820 $0.15

Answer 1

Answer

• Requirement asked

	Actual Results	Revenue & Spending Variance		Flexible Budget	Activity Variances		Planning Budget
Pizzas	1,240			1,240			1,200
Deliveries	174			174			180
Revenues	$                     17,420.00	$                                   680.00	Favourable	$                     16,740.00	$                                              540.00	Favourable	$                                                 16,200.00
Expenses:
Pizza Ingrediants	$                        4,985.00	$                                   273.00	Unfavourable	$                       4,712.00	$                                              152.00	Unfavourable	$                                                    4,560.00
kitchen Staff	$                        5,281.00	$                                     61.00	Unfavourable	$                       5,220.00	$                                                       -	None	$                                                    5,220.00
Utilities	$                           984.00	$                                   292.00	Unfavourable	$                           692.00	$                                                   2.00	Unfavourable	$                                                       690.00
Delivery Person	$                           609.00	$                                            -	None	$                           609.00	$                                                21.00	Favourable	$                                                       630.00
Delivery Vehicle	$                           655.00	$                                   146.00	Favourable	$                           801.00	$                                                   9.00	Favourable	$                                                       810.00
Equipment Depreciation	$                           275.00	$                                            -	None	$                           275.00	$                                                       -	None	$                                                       275.00
Rent	$                        1,830.00	$                                            -	None	$                       1,830.00	$                                                       -	None	$                                                   1,830.00
Miscellaneous	$                           954.00	$                                     52.00	Favourable	$                       1,006.00	$                                                   6.00	Unfavourable	$                                                    1,000.00
Total Expenses	$                     15,573.00	$                                   428.00	Unfavourable	$                     15,145.00	$                                              130.00	Unfavourable	$                                                 15,015.00
Net Operating Income	$                        1,847.00	$                                   252.00	Favourable	$                       1,595.00	$                                              410.00	Favourable	$                                                    1,185.00

--Working

	Actual Results	Flexible Budget	Planning Budget
Pizzas	1240	1240	1200
Deliveries	174	174	180
Revenues	17420	=1240*13.5	=1200*13.5
Expenses:
Pizza Ingrediants	4985	=1240*3.8	=1200*3.8
kitchen Staff	5281	5220	5220
Utilities	984	=630+(1240*0.05)	=630+(1200*0.05)
Delivery Person	609	=174*3.5	=180*3.5
Delivery Vehicle	655	=540+(174*1.5)	=540+(180*1.5)
Equipment Depreciation	275	275	275
Rent	1830	1830	1830
Miscellaneous	954	=820+(1240*0.15)	=820+(1200*0.15)

Conceptual notes:

#1: Flexible Budget data is based on 'budgeted rates' applied on 'actual level/output/units'

#2: Spending Variance = Difference between 'Actual data' and 'Flexible Budget data'

#3: Activity Variance = Difference between 'Flexible Budget data' and 'Static/Planned Budget data'.

* Favourable Variance in case of Revenues occurs when:

>Actual revenues are MORE than Flexible budget revenues [Spending Variance]

>Flexible budget revenues are MORE than Static/Planned budget revenues [Activity Variance]

* Unfavourable Variance in case of Revenues occurs when:

>Actual revenues are LESS than Flexible budget revenues [Spending Variance]

>Flexible budget revenues are LESS than Static/Planned budget revenues [Activity Variance]

* Favourable Variance in case of Expenses/Costs occurs when:

>Actual expenses/costs are LESS than Flexible budget expense/costs [Spending Variance]

>Flexible budget expenses/costs are LESS than Static/Planned budget expenses/costs [Activity Variance]

* Unfavourable Variance in case of Expenses/Costs occurs when:

>Actual expenses/costs are MORE than Flexible budget expense/costs [Spending Variance]

>Flexible budget expenses/costs are MORE than Static/Planned budget expenses/costs [Activity Variance]