Domino’s Pizza LL.C, operates pizza delivered and carry-out restaurants. The annual report describes its business as follows:
We offer a focused menu of bigb-quality, value-priced pizza with three types of crust (Hand-Tossed, Tbin Crust, and Deep Dish), along with Buffalo wings, bread sticks, cheesy bread, CinnaStix, and Coca-Cola products. Our band-tossed pizza is made from fresh dougb pizza sauce made from fresh tomatoes, and a choice of bigb-quality meat and vegetable toppings in generous portions. Our focused menu and use of premium ingredients enable us to consistently and efficiently produce the bigbest-quality pizza.
Over the 41 years since our founding, we have developed a simple, cost-efficient model we offer limited menu, our stores are designed for delivery and carry-out, and we do not generally offer dine-in service. As a result, our stores require relatively small, lower-rent locations and limited capital expenditures.
How would a master budget support planning, directing, and control for Domino’s?
 

Domino’s could use a master budget to plan operations consistent with the sales forecast. The sales forecast could be used to develop the production budget for
pizzas. The sales and production budgets would be identical since there would be no finished goods inventory for cooked pizzas. The sales (production) budget would be used to develop a direct materials purchases budget. For example, the pizza ingredients, packaging materials, beverages, and other materials could be planned from the sales budget. In addition, the cost of delivery fuel (driver reimbursement for gas) could be planned from the sales budget. The sales (production) budget could also be used to develop the direct labor budget for cooks, counter staff, dough making labor, and drivers. Much of the overhead is related to the number of restaurants, rather than the number of pizzas sold. That is, the number of restaurant locations will drive management salaries, rent, utilities, insurance, and other overhead costs. The drivers own the delivery vehicles; thus, vehicle depreciation and maintenance costs are not part of Domino’s overhead budget.

The budget process could be used to direct and coordinate all the various restaurants. In this way, all the managers would be operating under the same set of assumptions. The actual performance of the company and the individual stores could be compared with the budget in order to provide all levels of the organization appropriate feedback and control. This feedback can be used to adjust operations to any changes that may be occurring. Thus, if sales are expanding faster or slower than planned, costs could be brought into line rapidly. This would help prevent the company from becoming either short of drivers and food due to sales outpacing projections or overbuilding stores before sales have materialized in sufficient volume to justify the cost.