Milano Pizza is a small neighborhood pizzeria that has a small area for in-store
ID: 2597867 • 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 1,530 pizzas at an average selling price of $14 per pizza and for 210 deliveries.
Data concerning the pizzeria’s actual results in November appear below:
Fixed Cost
per Month Cost per
Pizza Cost per
Delivery Pizza ingredients $ 4.30 Kitchen staff $ 5,890 Utilities $ 600 $ 0.20 Delivery person $ 3.00 Delivery vehicle $ 620 $ 1.40 Equipment depreciation $ 392 Rent $ 1,850 Miscellaneous $ 720 $ 0.10 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 Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Flexible Budget Planning Budget 1,630 190 Pizzas Deliveries Revenue $ 23,360 Expenses Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous 7,030 5,830 880 570 984 392 1,850 784 18,320 $5,040 Total expense Net operating income
Explanation / Answer
Actual Revenue and spending variances Flexible budget Activity variances Planning budget Pizzas 1630 1630 1530 Deliveries 190 190 210 Revenue 23360 540 F 22820 1400 F 21420 Expenses: Pizza ingredients 7030 21 U 7009 430 U 6579 Kitchen staff 5830 60 F 5890 0 None 5890 Utilities 880 46 F 926 20 U 906 Delivery person 570 0 None 570 60 F 630 Delivery vehicle 984 98 U 886 28 F 914 Equipment depreciation 392 0 None 392 0 None 392 Rent 1850 0 None 1850 0 None 1850 Miscellaneous 784 99 F 883 10 U 873 Total expense 18320 86 F 18406 372 U 18034 Net operating income 5040 626 F 4414 1028 F 3386