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				$	4.50
Kitchen staff	$	6,150
Utilities	$	730		$	0.50
Delivery person							$	3.30
Delivery vehicle	$	750					$	1.50
Equipment depreciation	$	496
Rent	$	2,110
Miscellaneous	$	850		$	0.25

  

In November, the pizzeria budgeted for 1,920 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:

  

	Actual Results
Pizzas		2,020
Deliveries		160
Revenue	$	39,050
Pizza ingredients	$	9,370
Kitchen staff	$	6,090
Utilities	$	945
Delivery person	$	528
Delivery vehicle	$	1,010
Equipment depreciation	$	496
Rent	$	2,110
Miscellaneous	$	862

Required:

1. Compute the revenue and spending 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.)

Answer 1

Revenue and spending variance

Revenue (2020*19-39050)	670 F
Expense
Pizza ingredients (2020*4.5-9370)	280 U
Kitchen staff (6150-6090)	60 F
Utilities (1740-945)	795 F
Delivery person (528-528)	0 None
Delivery vehicle (990-1010)	20 U
Equipment depreciation (496-496)	0 None
rent (	0 None
Miscellaneous (1355-862)	493 F
Total expense	1048 F
Net operating income	1718 F