Milan° Pizza is a small neighborhood pizzeria that has a small area for in-store

Question

Milan° 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 Cost per Cost per $ 4.60 $ 0.50 per Month Pizza Delivery Pizza ingredients Kitchen staff utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous 5,950 $630 $3.30 $1.70 650 $ 416 $1,910 $ 750 0.25 In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries

Explanation / Answer

Solution.

Flexible budget report:

29,240

(1720×17)

27,540

(1620×17)

$7912

(1720×4.60)

$7452

(1620×4.60)

1720

(.50×1720+630)

1440

(.50×1620+630)

726

(3.3×220)

792

(3.3×240)

Actual result spending variance Flexible budget activity variance Planning budget Pizzas 1720 1720 1620 Deliveries 220 220 240 Revenue 29,810 570 F

29,240

(1720×17)

1700 F

27,540

(1620×17)

Expenses: Pizza ingredients 7,570 342 F

$7912

(1720×4.60)

460 U

$7452

(1620×4.60)

Kitchen staff 5,890 60 F 5,950 0 5,950 Utilities 895 825 F

1720

(.50×1720+630)

280 U

1440

(.50×1620+630)

Delivery person 726 0

726

(3.3×220)

66 F

792

(3.3×240)

Delivery vehicle 990 34 F 1024 34 F 1058 Equipment depreciation 416 0 416 0 416 Rent 1,910 0 1910 0 1910 Miscellaneous 802 378 F 1180 25 U 1155 Total expense 19,199 1639 F 20,838 965 U 19,873 Net operating income 10,611 2209 F 8402 735 F 7667

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