Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offeringtake-out and free home delivery services. The pizzeria’s owner has determined that the shop has two majorcost drivers—the number of pizzas sold and the number of deliveries made. Data concerning the pizzeria’scosts appear below:Fixed Cost Cost per Cost perper Month Pizza DeliveryPizza ingredients ............... $3.80Kitchen staff ....................... $5,220Utilities ............................... $630 $0.05Delivery person .................. $3.50Delivery vehicle ................. $540 $1.50Equipment depreciation ..... $275Rent ................................... $1,830Miscellaneous .................... $820 $0.15In November, the pizzeria budgeted for 1,200 pizzas at an average selling price of $13.50 per pizzaand for 180 deliveries.Data concerning the pizzeria’s operations in November appear below:Actual ResultsPizzas ................................... 1,240Deliveries .............................. 174Revenue ............................... $17,420Pizza ingredients ................. $4,985Kitchen staff .......................... $5,281Utilities .................................. $984Delivery person .................... $609Delivery vehicle ................... $655Equipment depreciation ........ $275Rent ...................................... $1,830Miscellaneous ...................... $954Required:1. Prepare a flexible budget performance report that shows both activity variances and revenue andspending variances for the pizzeria for November.2. Explain the activity variances.
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 Cost per Cost per
per Month Pizza Delivery
Pizza ingredients ............... $3.80
Kitchen staff ....................... $5,220
Utilities ............................... $630 $0.05
Delivery person .................. $3.50
Delivery vehicle ................. $540 $1.50
Equipment depreciation ..... $275
Rent ................................... $1,830
Miscellaneous .................... $820 $0.15
In November, the pizzeria budgeted for 1,200 pizzas at an average selling price of $13.50 per pizza
and for 180 deliveries.
Data concerning the pizzeria’s operations in November appear below:
Actual Results
Pizzas ................................... 1,240
Deliveries .............................. 174
Revenue ............................... $17,420
Pizza ingredients ................. $4,985
Kitchen staff .......................... $5,281
Utilities .................................. $984
Delivery person .................... $609
Delivery vehicle ................... $655
Equipment depreciation ........ $275
Rent ...................................... $1,830
Miscellaneous ...................... $954
Required:
1. Prepare a flexible budget performance report that shows both activity variances and revenue and
spending variances for the pizzeria for November.
2. Explain the activity variances.
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