Milano Pizza is a small neighborhood pizzeria that has a small area for in-store
ID: 2393091 • Letter: M
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:
In November, the pizzeria budgeted for 1,770 pizzas at an average selling price of $14 per pizza and for 210 deliveries.
Data concerning the pizzeria’s actual results in November appear below:
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.)
Fixed Costper Month Cost per
Pizza Cost per
Delivery Pizza ingredients $ 4.00 Kitchen staff $ 6,050 Utilities $ 680 $ 1.00 Delivery person $ 2.80 Delivery vehicle $ 700 $ 2.20 Equipment depreciation $ 456 Rent $ 2,010 Miscellaneous $ 800 $ 0.20 Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Revenue and Spending Variances Flexible Budget Planning Budget Activity Variances 1,870 190 1,770 210 Pizzas 1,870 Deliveries 190 Revenue $ 26,800 Expenses Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous 8,470 5,990 920 532 1,000 456 2,010 832 20,210 $6,590 Total expense Net operating income
Explanation / Answer
Particulars Actual Revenue and spending variance Flexible budget Activity variance Static budget Pizzas 1870 1870 1770 Deliveries 190 190 210 Revenue 26,800 620 F 26180 1400 F 24780 Expenses Pizza ingredients 8470 990 U 7480 400 U 7080 Kitchen staff 5990 60 F 6050 0 6050 Utilities 920 1630 F 2550 100 U 2450 Delivery person 532 0 532 56 F 588 Delivery vehicle 1000 118 F 1118 44 F 1162 Equipment depreciation 456 0 456 0 456 Rent 2010 0 2010 0 2010 Miscellaneous 832 342 F 1174 20 U 1154 Total expense 20210 1160 F 21370 420 U 20950 Net operating income 6590 1780 F 4810 980 F 3830