Question - Price and efficiency variances. Peterson Foods manufacturers pumpkin scones. For January 2009, it budgeted to purchase and use 15,000 pounds of pumpkin at $0.89 a pound. Actual purchases and usage for January 2009 were 16,000 pounds at $0.82 a pound. It budgets for 60,000 pumpkin scones. Actual output was 80,800 pumpkin scones.
1. Compute the flexible-budget variances.
2. Compute the price and efficiency variances.
3. Comment on the above results and provide a possible explanation for them.