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.

Data concerning the pizzeria’s costs appear below:

	Fixed Cost per Month			Cost per Pizza			Cost per Delivery
Pizza ingredients				$	4.30
Kitchen staff	$	5,890
Utilities	$	600		$	.20
Delivery person							$	3.00
Delivery vehicle	$	620					$	1.40
Equipment depreciation	$	392
Rent	$	1,850
Miscellaneous	$	720		$	.10

    

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 operations in November appear below:

  

	Actual Results
Pizzas		1,630
Deliveries		190
Revenue	$	23,360
Pizza ingredients	$	7,030
Kitchen staff	$	5,830
Utilities	$	880
Delivery person	$	570
Delivery vehicle	$	984
Equipment depreciation	$	392
Rent	$	1,850
Miscellaneous	$	784

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.)

Answer 1

Pizzeria
Flexible Budget Performance Report
For the month ended November 30
	Planning	Activity		Flexible	Revenue/Spending		Actual
	Budget	Variance		Budget	Variance		Results
	($)	($)		($)			($)
Pizzas (q1)	1,530.00			1,630.00			1,630.00
Deliveries (q2)	210.00			190.00
Revenue ($14.00 x q1)	21,420.00	1,400.00	F	22,820.00	540.00	F	23,360.00
Expenses:
Pizza ingredients ($4.30q1)	6,579.00	430.00	U	7,009.00	21.00	U	7,030.00
Kitchen staff	5,890.00	-	-	5,890.00	60.00	F	5,830.00
Utilities ($600 + $0.20q1)	906.00	20.00	U	926.00	46.00	F	880.00
Delivery person ($3q2)	630.00	60.00	F	570.00	-	-	570.00
Delivery vehicle ($620 + $1.40q2)	914.00	28.00	F	886.00	98.00	U	984.00
Equipment depreciation	392.00	-	-	392.00	-	-	392.00
Rent	1,850.00	-	-	1,850.00	-	-	1,850.00
Miscellaneous ($720 + $0.10q1)	873.00	10.00	U	883.00	99.00	F	784.00
Total Expense	18,034.00	372.00	U	18,406.00	86.00	F	18,320.00
Net Operating Income	3,386.00	1,772.00	F	4,414.00	454.00	F	5,040.00
(Revenue - Expenses)
Explanation
Activity Variances = Flexible Budget Amounts - Planning Budget Amounts
Revenue/Spending Variance = Actual Result - Flexible Budget Amount