Milano Pizza is a small neighborhood pizzeria that has a small area for in-store
ID: 2567093 • 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 2,130 pizzas at an average selling price of $18 per pizza and for 250 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 $ 4.10 Kitchen staff $ 6,290 Utilities $ 800 $ 0.20 Delivery person $ 3.00 Delivery vehicle $ 820 $ 2.20 Equipment depreciation $ 552 Rent $ 2,250 Miscellaneous $ 920 $ 0.10
Explanation / Answer
Actual results Revenue and spending variances Flexible Budget Activity variances Planning budget Pizzas 2230 2230 2130 Deliveries 230 230 250 Revenue 40880 740 F 40140 1800 F 38340 Expenses: Pizza ingredients 10630 1487 U 9143 410 U 8733 Kitchen staff 6230 60 F 6290 0 None 6290 Utilities 980 266 F 1246 20 U 1226 Delivery person 690 0 None 690 60 F 750 Delivery vehicle 1024 302 F 1326 44 F 1370 Equipment depreciation 552 0 None 552 0 None 552 Rent 2250 0 None 2250 0 None 2250 Miscellaneous 904 239 F 1143 10 U 1133 Total expenses 23260 620 U 22640 336 U 22304 Net operating income 17620 120 F 17500 1464 F 16036