Chapter 9, Problem 19P

More than One Cost Driver

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as 11 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 pizzerias cost formulas appear below:

In November, the pizzeria budgeted for 1.200 pizzas at an average selling price of $13.50 per pizza and for 180 deliveries.

Date concerning the pizzeria’s actual results in Noverber appear below:

Required:
1. Compute the revenue and spending variances for the pizzeria for November.

(Hint: Refer to Exhibit 9−6.)
2. Explain the revenue and spending variances.