Verona Pizza is a small neighborhood pizzeria that has a small area for in-store

| September 2, 2016

Question
P10-21 Verona Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well offering takeout 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 . . . . . . . . . . $4.20

Kitchen staff . . . . . . . . . . . . . . $5,870

Utilities . . . . . . . . . . . . . . . . . . $590 $0.10

Delivery person . . . . . . . . . . . $2.90

Delivery vehicle . . . . . . . . . . . $610 $1.30

Equipment depreciation . . . . . $384

Rent . . . . . . . . . . . . . . . . . . . . $1,790

Miscellaneous . . . . . . . . . . . . $710 $0.05

In October, the pizzeria budgeted for 1,500 pizzas at an average selling price of $13.00 per pizza and for 200 deliveries.

Data concerning the pizzeria’s operations in October appear below:

Actual Results

Pizzas. . . . . . . . . . . . . . . . . . . . . 1,600

Deliveries . . . . . . . . . . . . . . . . . . 180

Revenue . . . . . . . . . . . . . . . . . . . $21,340

Pizza ingredients . . . . . . . . . . . . . $6,850

Kitchen staff . . . . . . . . . . . . . . . . . $5,810

Utilities . . . . . . . . . . . . . . . . . . . . . $875

Delivery person. . . . . . . . . . . . . . $522

Delivery vehicle . . . . . . . . . . . . . . $982

Equipment depreciation. . . . . . . . $384

Rent . . . . . . . . . . . . . . . . . . . . . . . . $1,790

Miscellaneous . . . . . . . . . . . . . . . $778

Required:

1. Prepare a flexible budget performance report that shows both activity variances and revenue and spending variances for the pizzeria for October.

2. Explain the activity variances.

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