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:

	Fixed Cost per Month			Cost per Pizza			Cost per Delivery
Pizza ingredients				$	4.10
Kitchen staff	$	6,070
Utilities	$	690		$	0.10
Delivery person							$	2.90
Delivery vehicle	$	710					$	2.30
Equipment depreciation	$	464
Rent	$	2,030
Miscellaneous	$	810		$	0.05

In November, the pizzeria budgeted for 1,800 pizzas at an average selling price of $15 per pizza and for 220 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

	Actual Results
Pizzas		1,900
Deliveries		200
Revenue	$	29,130
Pizza ingredients	$	8,650
Kitchen staff	$	6,010
Utilities	$	925
Delivery person	$	580
Delivery vehicle	$	1,002
Equipment depreciation	$	464
Rent	$	2,030
Miscellaneous	$	838

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 Flexible Budget Planning Budget Pizzas Deliveries Actual Results 1,900 200 $ 29,1301 Revenue Expenses Pizza ingredients Kitchen staff Utilities Delivery person Delivery vehicle Equipment depreciation Rent Miscellaneous Total expense Net operating income 8,6501 6,010 925 580 1,002 464 2,030 838 20,499 8,631 $

Answer 1

Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Revenue and Flexible Activity Planning Actual Results nding Variar Budget Variances Budget Pizzas (9) 1900 1900 1800 Deliveries (r) 200 200 220 29130 630 F 28500 1500 F 27000 Revenue ($15.00q) Expenses: Pizza Ingredients ($4.109) Kitchen Staff ($6,070) Utilities ($690 + $0.109) Delivery person ($2.90 r) Delivery Vehicle ($710 + $2.30 r) Equipment Depreciation ($464) Rent ($2,030) Miscellaneous ($810 + $0.05q) Total expense Net operating income 860 U 60 F 45 U None 168 F 8650 6010 925 580 1002 464 2030 838 20499 8631 7790 6070 880 580 1170 464 2030 410 U None 10 U 58 F 46 F None None 5U 321 U 1179 F 7380 6070 870 638 1216 464 2030 900 19568 7432 None None 67 F 610 U 20 F 905 19889 8611

1 Milano Pizza 2 3 Flexible Budget Performance Report 4 For the Month Ended November 30 5 Revenue and Spending Variances Flexible Budget Activity Variances 6 Actual Results Planning Budget 1800 220 7 Pizzas (a) 8 Deliveries (r) 1900 200 =B7 =B8 9 29130 630 F =D7*15 1500 F =F7*15 10 Revenue ($15.00q) 11 Expenses: 12 Pizza Ingredients ($4.109) 13 Kitchen Staff ($6,070) 14 Utilities ($690 + $0.109) 15 Delivery person ($2.90 r) 16 Delivery Vehicle ($710 + $2.30 r) 17 Equipment Depreciation ($464) 18 Rent ($2,030) 19 Miscellaneous ($810 + $0.059) 20 Total expense 21 Net operating income 22 8650 6010 925 580 1002 464 2030 838 =SUM(B12:319) =B10-B20 860 U 60 F 45 U None 168 F None None 67 F 610 U 20 F =D7*4.1 6070 =690+0.1*D7) 2.9*D8 2.3*D81710 464 2030 =0.05*D7+810 =SUM(D12:D19) =D10-D20 410 U None 10 U 58 F 46 F None None 50 321 U 1179 F =F7*4.1 6070 =690+0.1*F7) =2.9*F8 =2.3*F8+710 464 2030 =0.05*F7+810 =SUM(F12:F19) =F10-F20