Verona Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well offering takeout 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. Data concerning the pizzeria’s costs appear below:
| Fixed Cost per Month | Cost per Pizza | Cost per Delivery |
Pizza ingredients |
| $ 4.20 |
|
Kitchen staff | $ 5,870 |
|
|
Utilities | $ 590 | $ 0.10 |
|
Delivery person |
|
| $ 2.90 |
Delivery vehicle | $ 610 |
| $ 1.30 |
Equipment depreciation | $ 384 |
|
|
Rent | $ 1,790 |
|
|
Miscellaneous | $ 710 | $ 0.05 |
|
In October. the pizzeria budgeted for 1,500 pizzas at an average selling price of $ 13,00 per pizza and for 200 deliveries.
Data concerning the pizzeria’s operations in October appear below:
| Actual Results |
Pizzas | 1,600 |
Deliveries | 180 |
Revenue | $ 21,340 |
Pizza ingredients | $ 6,850 |
Kitchen staff | $ 5,810 |
Utilities | $ 875 |
Delivery person | $ 522 |
Deliveryvehicle | $ 982 |
Equipment depreciation | $ 384 |
Rent | $ 1,790 |
Miscellaneous | $ 778 |
Required:
1. Prepare a flexible budget performance report that shows both activity variances and revenue and spending variances for the pizzeria for October.
2. Explain the activity variances
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