Problem: Peterson Foods manufactures pumpkin scones. For January 2007, it budgeted to purchase and use 15,000 pounds of pumpkin at $0.89 a pound. It budgets for 60,000 pumpkin scones.
Actual purchases and usage for January 2007 were 16,000 pounds at $0.82 a pound. Actual output was 60,800 pumpkin scones.
1. Compute the flexible-budget variance.
2. Compute the price and efficiency variances.
3. Comment on the results in requirements 1 and 2.