Question: Chapter 9: Flex Budgeting and Variance Analysis Part 2 Pierre Pizza is a gourmet pizza shop in Palm Springs. It offers in store dining as
Chapter 9: Flex Budgeting and Variance Analysis Part 2
Pierre Pizza is a gourmet pizza shop in Palm Springs. It offers in store dining as well as take out and free home delivery services. The owner has determined that the shop has 2 major cost drivers - the number of pizzas sold and the number of deliveries made. Data for the cost formulas appear below:
| Fixed cost per month | Cost per pizza | Cost per delivery | |||||||||
Pizza ingredients | $ | 0 | $ | 3.80 | $ | 0 | |||||
Kitchen staff | $ | 5,220 | $ | 0 | $ | 0 | |||||
| Utilities | $ | 1,450 | $ | 0.2 | $ | 0 | |||||
Delivery | $ | 540 | $ | 0 | $ | 5 | |||||
Rent | $ | 2,105 | |||||||||
In May, the restaurant budgeted for 1,200 pizzas at an average selling price of $13.50 per pizza and for 180 deliveries. Actual May results appear below:
| Actual Results: | |||
Pizzas | 1,240 | ||
Deliveries | 174 | ||
Revenue | $ | 17,420 | |
| Pizza ingredients | 4,985 | ||
Kitchen staff | 5,281 | ||
Utilities | 1,938 | ||
Delivery | 1,264 | ||
Rent | 2,105 | ||
Net operating income | $ | 1,847 |
Required:
Prepare a report showing the restaurant's revenue and spending variances for May. Don't forget to interpret your results.
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