Milano Pizza is a small neighborhood pizzeria that has a small area for in-store
ID: 2531385 • 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 2,040 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:
Fixed Cost
per Month Cost per
Pizza Cost per
Delivery Pizza ingredients $ 4.90 Kitchen staff $ 6,230 Utilities $ 770 $ 0.90 Delivery person $ 2.70 Delivery vehicle $ 790 $ 1.90 Equipment depreciation $ 528 Rent $ 2,190 Miscellaneous $ 890 $ 0.20 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.) Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Flexible Budget Planning Budget Pizzas 2,140 Deliveries 200 Revenue S 32,810 Expenses Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous 10.090 6,170 965 540 1,018 528 2,190 886 22,387 S 10,423 Total expense Net operating income
Explanation / Answer
Actual Revenue and spending variances Flexible budget Activity variances Planning budget Pizzas 2140 2140 2040 Deliveries 200 200 220 Revenue 32810 710 F 32100 1500 F 30600 Expenses: Pizza ingredients 10090 396 F 10486 490 U 9996 Kitchen staff 6170 60 F 6230 0 None 6230 Utilities 965 1731 F 2696 90 U 2606 Delivery person 540 0 None 540 54 F 594 Delivery vehicle 1018 152 F 1170 38 F 1208 Equipment depreciation 528 0 None 528 0 None 528 Rent 2190 0 None 2190 0 None 2190 Miscellaneous 886 432 F 1318 20 U 1298 Total expenses 22387 2771 F 25158 508 U 24650 Net operating income 10423 3481 F 6942 992 F 5950