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 2,160 pizzas at an average selling price of $19 per pizza and for 180 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 $ 4.20 Kitchen staff $ 6,310 Utilities $ 810 $ 0.30 Delivery person $ 3.10 Delivery vehicle $ 830 $ 1.20 Equipment depreciation $ 560 Rent $ 2,270 Miscellaneous $ 930 $ 0.15

Explanation / Answer

Flexible Budget performance Actual Revenue & Spending flexible Activity variance Planning results variance budget budget Revenue 43,960 1,020 F 42940 1900 F 41040 less:Expense pizza ingredients 10,810 1,318 U 9,492 420 U 9,072 kitchen staff 6,250 60 F 6,310 0 0 6,310 utilities 985 503 F 1488 30 U 1458 delivery person 496 0 N 496 62 F 558 delivery vechicle 1,026 4 U 1022 24 F 1046 equipment depreciation 560 0 N 560 0 N 560 rent 2,270 0 N 2,270 0 N 2,270 Miscellaenous 910 359 F 1269 15 U 1254 total expense 23,307 400 U 22,907 379 U 22,528 Net operating income 20,653 620 F 20,033 1,521 F 18,512

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