7-21 Price and efficiency variances. Peterson Foods manufactures pumpkin scones. For
January 2007, it budgeted to purchase and use 15,000 pounds of pumpkin at $0.89 a
pound. Actual purchases and usage for January 2007 were 16,000 pounds at $0.82 a
pound. It budgets for 60,000 pumpkin scones. Actual output was 60,800 pumpkin scones.
1. Compute the flexible-budget variance.
The key information items are:
Actual
Budgeted
Output units (scones)
Input units (pounds of pumpkin)
Cost per input unit
60,800
16,000
$0.82
60,000
15,000
$0.89
Peterson budgets to obtain 4 pumpkin scones from each pound of pumpkin.
The flexible-budget variance is $408 F.
Actual
Results
Flexible-
Budget
Variance
(2) = (1) –
Flexible
Budget
Sales-
Volume
Variance
(4) = (3) –
Static
Budget
