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				$	4.40
Kitchen staff	$	5,910
Utilities	$	610		$	0.30
Delivery person							$	3.10
Delivery vehicle	$	630					$	1.50
Equipment depreciation	$	400
Rent	$	1,870
Miscellaneous	$	730		$	0.15

  

In November, the pizzeria budgeted for 1,560 pizzas at an average selling price of $15 per pizza and for 220 deliveries.

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

  

	Actual Results
Pizzas		1,660
Deliveries		200
Revenue	$	25,450
Pizza ingredients	$	7,210
Kitchen staff	$	5,850
Utilities	$	885
Delivery person	$	620
Delivery vehicle	$	986
Equipment depreciation	$	400
Rent	$	1,870
Miscellaneous	$	790

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.)

Answer 1

Solution:

Milano Pizza
Flexible Budget Performance Report
For the month ended November 30
Particulars	Actual results	Revenue and spending variances		Flexible Budget	Activity Variances		Planning Budget
Nos of Pizza	1660			1660			1560
Nos of deliveries	200			200			220
Revenue	$25,450.00	$550.00	F	$24,900.00	$1,500.00	F	$23,400.00
Expenses:
Pizza Ingredients	$7,210.00	$94.00	F	$7,304.00	$440.00	U	$6,864.00
Kitchen Staff	$5,850.00	$60.00	F	$5,910.00	$0.00	None	$5,910.00
Utilities	$885.00	$223.00	F	$1,108.00	$30.00	U	$1,078.00
Delivery Person	$620.00	$0.00	None	$620.00	$62.00	F	$682.00
Delivery Vehicle	$986.00	$56.00	U	$930.00	$30.00	F	$960.00
Equipment Depreciation	$400.00	$0.00	None	$400.00	$0.00	None	$400.00
Rent	$1,870.00	$0.00	None	$1,870.00	$0.00	None	$1,870.00
Miscellaneous	$790.00	$189.00	F	$979.00	$15.00	U	$964.00
Total Expenses	$18,611.00	$510.00	F	$19,121.00	$393.00	U	$18,728.00
Net Income	$6,839.00	$1,060.00	F	$5,779.00	$1,107.00	F	$4,672.00