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

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 2,220 pizzas at an average selling price of $21 per pizza and for 200 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 Cost
per Month Cost per
Pizza Cost per
Delivery Pizza ingredients $ 4.40 Kitchen staff $ 6,350 Utilities $ 830 $ 0.50 Delivery person $ 3.30 Delivery vehicle $ 850 $ 1.40 Equipment depreciation $ 576 Rent $ 2,310 Miscellaneous $ 950 $ 0.25

Explanation / Answer

Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Revenue and spending variances Flexible Budget Activity variances Planning Budget Pizzas 2,320 2,320 2220 Deliveries 180 180 200 Revenue 49490 770 F 48720 2100 F 46620 Expenses: Pizza ingredients 11,170 962 U 10208 440 U 9768 Kitchen staff 6,290 60 F 6350 0 None 6350 Utilities 995 -995 U 1990 50 U 1940 Delivery person 594 0 None 594 66 F 660 Delivery vehicle 1,030 72 F 1102 28 F 1130 Equipment depreciation 576 0 None 576 0 None 576 Rent 2,310 0 None 2310 0 None 2310 Miscellaneous 922 608 F 1530 25 U 1505 Total expense 23,887 773 F 24,660 421 U 24,239 Net operating income 25,603 1,543 F 24,060 1679 F 22,381

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