Milano Pizza is a small neighborhood pizzeria that has a small area for in-store
ID: 2578478 • 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 1,710 pizzas at an average selling price of $20 per pizza and for 190 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.)
Milano PizzaFlexible Budget Performance ReportFor the Month Ended November 30Actual ResultsFlexible BudgetPlanning BudgetPizzas1,810Deliveries170Revenue$36,800Expenses:Pizza ingredients8,110Kitchen staff5,950Utilities910Delivery person442Delivery vehicle996Equipment depreciation440Rent1,970Miscellaneous820Total expense19,638Net operating income$17,162
Fixed Costper Month Cost per
Pizza Cost per
Delivery Pizza ingredients $ 4.90 Kitchen staff $ 6,010 Utilities $ 660 $ 0.80 Delivery person $ 2.60 Delivery vehicle $ 680 $ 2.00 Equipment depreciation $ 440 Rent $ 1,970 Miscellaneous $ 780 $ 0.10
Explanation / Answer
Actual results Revenue and spending variances Flexible budget Activity variances Planning budget Pizzas 1810 1810 1710 Deliveries 170 170 190 Revenue 36800 600 F 36200 2000 F 34200 Expenses: Pizza ingredients 8110 759 F 8869 490 U 8379 Kitchen staff 5950 60 F 6010 0 None 6010 Utilities 910 1198 F 2108 80 U 2028 Delivery person 442 0 None 442 52 F 494 Delivery vehicle 996 24 F 1020 40 F 1060 Equipment depreciation 440 0 None 440 0 None 440 Rent 1970 0 None 1970 0 None 1970 Miscellaneous 820 141 F 961 10 U 951 Total expenses 19638 2182 F 21820 488 U 21332 Net operating income 17162 2782 F 14380 1512 F 12868