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 $ 4.60 Kitchen staff $ 5,950 Utilities $ 630 $ 0.50 Delivery person $ 3.30 Delivery vehicle $ 650 $ 1.70 Equipment depreciation $ 416 Rent $ 1,910 Miscellaneous $ 750 $ 0.25 In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries. Data concerning the pizzeria’s actual results in November appear below: Actual Results Pizzas 1,720 Deliveries 220 Revenue $ 29,810 Pizza ingredients $ 7,570 Kitchen staff $ 5,890 Utilities $ 895 Delivery person $ 726 Delivery vehicle $ 990 Equipment depreciation $ 416 Rent $ 1,910 Miscellaneous $ 802 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.) Milano Pizza Revenue and Spending Variances For the Month Ended November 30 Actual Results Revenue and Spending Variances Flexible Budget Pizzas 1,720 Deliveries 220 Revenue $29,810 Expenses: Pizza ingredients 7,570 Kitchen staff 5,890 Utilities 895 Delivery person 726 Delivery vehicle 990 Equipment depreciation 416 Rent 1,910 Miscellaneous 802 Total expense 19,199 Net operating income $10,611

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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		$ 4.60
Kitchen staff	$ 5,950
Utilities	$ 630	$ 0.50
Delivery person			$ 3.30
Delivery vehicle	$ 650		$ 1.70
Equipment depreciation	$ 416
Rent	$ 1,910
Miscellaneous	$ 750	$ 0.25

In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

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

	Actual Results
Pizzas	1,720
Deliveries	220
Revenue	$ 29,810
Pizza ingredients	$ 7,570
Kitchen staff	$ 5,890
Utilities	$ 895
Delivery person	$ 726
Delivery vehicle	$ 990
Equipment depreciation	$ 416
Rent	$ 1,910
Miscellaneous	$ 802

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.)

Milano Pizza
Revenue and Spending Variances
For the Month Ended November 30
	Actual Results	Revenue and Spending Variances	Flexible Budget
Pizzas	1,720
Deliveries	220
Revenue	$29,810
Expenses:
Pizza ingredients	7,570
Kitchen staff	5,890
Utilities	895
Delivery person	726
Delivery vehicle	990
Equipment depreciation	416
Rent	1,910
Miscellaneous	802
Total expense	19,199
Net operating income	$10,611

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