1. Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Revenue and Actual Spending Flexible Activity Planning Results Variances Budget Variances Budget Pizzas (q). 1,240 Deliveries (q2). 174 1,240 174 1,200 180 Revenue ($13.50q1). $17,420 $680 F $16,740 $540 F $16,200 Expenses: Pizza ingredients ($3.80q1).... 4,985 273 U 4,712 152 U 4,560 Kitchen staff ($5,220).... 5,281 61 U 5,220 0 5,220 Utilities ($630+ $0.05q1). 984 292 U 692 2 U 690 Delivery person ($3.50q2).. 609 0 609 21 F 630 Delivery vehicle ($540+ $1.50q2).. 655 146 F 801 9 F 810 Equipment depreciation ($275)...... 275 275 0 275 Rent ($1,830)... 1,830 1,830 0 1,830 Miscellaneous ($820 + $0.15q1).... 954 52 F 1,006 6 U 1,000 Total expense. 15,573 428 U 15,145 130 U 15,015 Net operating income. $ 1,847 $252 F $1,595 $410 F $1,185 2. Some of the activity variances are favorable and some are unfavorable. This occurs because there are two cost drivers (i.e., measures of activity) and one is up while the other is down. The actual number of pizzas delivered is greater than budgeted, so the activity variance for revenue is favorable, but the activity variances for pizza ingredients, utilities, and miscellaneous are unfavorable. In contrast, the actual number of deliveries is less than budgeted, so the activity variances for the delivery person and the delivery vehicle are favorable.