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 $ 4.40
Kitchen staff $ 6,350
Utilities $ 830 $ .50
Delivery person $ 3.30
Delivery vehicle $ 850 $ 1.40
Equipment depreciation $ 576
Rent $ 2,310
Miscellaneous $ 950 $ .25
In November, the pizzeria budgeted for 1,590 pizzas at an average selling price of $16 per pizza and for 230 deliveries. Data concerning the pizzeria’s operations in November appear below:Actual ResultsPizzas 1,690 Deliveries 210 Revenue $ 27,600 Pizza ingredients $ 7,390 Kitchen staff $ 5,870 Utilities $ 890 Delivery person $ 672 Delivery vehicle $ 988 Equipment depreciation $ 408 Rent $ 1,890 Miscellaneous $ 796 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.)

Explanation:

Milano Pizza  

Flexile Budget performance report

Planning Budget  Activity variancesFlexible budgetRevenue and spending variancesActual results

Pizzas1590  1, 690  1, 690

Deliveries230  210  210

Revenue ($)25, 4401, 600 F27, 040560 F27, 600

Expenses: ($)      

Pizza ingredients (4.4 x 1590)6, 996440 U7, 43646 F7, 390

Kitchen staff6, 35006, 350480 F5, 870

Utilities (830+0.5x 1590)1, 62550 U1, 675785 F890

Delivery person (3.3 x 230)75966 F69321 F672

Delivery vehicle (850 +1.4 x 230)1, 17228 F1, 144156 F988

Equipment depreciation5760576168 F408

Rent  2, 31002, 310420 F1, 890

Miscellaneous (950 +0.25 x 1590)1, 34825 U1, 373577 F  796

Total expense21, 136421 U21, 5572, 653 F18, 904

Some of the activity variances are favorable and some are unfavorable.  

Unfavorable spending variances mean that the cost was greater than what was budgeted. The actual number of pizzas sold is more than budgeted, so the activity revenue is favorable.

Activity variance column is the variance between the planning column and the flexible budget column. The activity variance is unfavorable because the expenses incurred were greater than budgeted.

Revenue and spending variance column is the variance between the flexible budget column and the actual results. The total expenses variance is favorable because of all the expenses actually incurred being less than reflected on the flexible budget.

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