Harvest Foods manufactures pumpkin scones. For January 2017, it budgeted to purchase and use 16,500 pounds of pumpkin at $0.87 a pound. Actual purchases and usage for January 2017 were 17,000 pounds at $0.82 a pound. Harvest budgeted for 66,000 pumpkin scones. Actual output was 57,800 pumpkin scones. 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.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Harvest Foods manufactures pumpkin scones. For January 2017, it budgeted to purchase and use 16,500 pounds of pumpkin at $0.87 a pound. Actual purchases and usage for January 2017 were 17,000 pounds at $0.82 a pound. Harvest budgeted for 66,000 pumpkin scones. Actual output was 57,800 pumpkin scones.
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1.
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Compute the flexible-
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2.
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Compute the price and efficiency variances.
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3.
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Comment on the results for requirements 1 and 2 and provide a possible explanation for them.
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