Question - Price and efficiency variances
Peterson Foods manufactures pumpkin scones. For January 2014, it budgeted to purchase and use 15,000 pounds of pumpkin at $0.89 a pound. Actual purchases and usage for January 2014 were 16,000 pounds at $0.82 a pound. Peterson budgeted for 60,000 pumpkin scones. Actual output was 60,800 pumpkin scones.
Required:
1. Compute the flexible-budget variance.
2. Compute the price and efficiency variances.
3. Comment on the results for requirements 1 and 2 and provide a possible explanation for them.