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:

  

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

Actual Results Revenue and spending variances Flexible budget Activity variances Planning budget Pizzas 2,260 2,260 2160 Deliveries 160 160 180 Revenue 43,690 750 F 42940 1900 F 41040 Expenses: Pizza ingredients 10,810 1,318 U 9492 420 U 9072 Kitchen staff 6,250 60 F 6310 0 None 6310 Utilities 985 503 F 1488 30 U 1458 Delivery person 496 0 None 496 62 F 558 Delivery vehicle 1,026 4 U 1022 24 F 1046 Equipment depreciation 560 0 None 560 0 None 560 Rent 2,270 0 None 2270 0 None 2270 Miscellaneous 910 359 F 1269 15 U 1254 Total expense 23,307 400 U 22,907 379 U 22,528 Net operating income 20,383 350 F 20,033 1521 F 18,512

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