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 1,980 pizzas at an average selling price of $13 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 $ 4.70 Kitchen staff $ 6,190 Utilities $ 750 $ 0.70 Delivery person $ 3.50 Delivery vehicle $ 770 $ 1.70 Equipment depreciation $ 512 Rent $ 2,150 Miscellaneous $ 870 $ 0.10

Explanation / Answer

Actual Revenue and spending variances Flexible budget Activity variances Planning budget Pizzas 2080 2080 1980 Deliveries 180 180 200 Revenue 27730 690 F 27040 1300 F 25740 Expenses: Pizza ingredients 9130 646 F 9776 470 U 9306 Kitchen staff 6130 60 F 6190 0 None 6190 Utilities 955 1251 F 2206 70 U 2136 Delivery person 630 0 None 630 70 F 700 Delivery vehicle 1014 62 F 1076 34 F 1110 Equipment depreciation 512 0 None 512 0 None 512 Rent 2150 0 None 2150 0 None 2150 Miscellaneous 874 204 F 1078 10 U 1068 Total expense 21395 2223 F 23618 446 U 23172 Net operating income 6335 2913 F 3422 854 F 2568

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