c. pay-for-performance standard
Explanation:
Pay-for-performance compensation means that there is the payment is made that depend upon the performance. In this, the employee can get the incentive and reward for attaining the goals & objectives also at the same time they would be highly motivated to perform better
So as per the given situation, it is a pay-for performance standard situation
Answer and Explanation:
Given:
Budgeted Purchase = 14,750 pound at $0.92 per pound
Actual Purchase = 16,000 pound at $.85 per pound
Total budgeted output = 59,000 pumpkin
Total Actual output = 59,200 pumpkin
1. Computation of the flexible budget variance:
Actual cost of pumpkin - Standard cost of pumpkin
(Actual quantity × Actual rate) - [(Actual output / Budgeted output )( Budgeted quantity × Budgeted rate)]
( 16,000 × $0.85 ) - [( 59,200 / 59,000) / (14,750 × $0.92)]
$13,600 - [$13,616]
$16 (favorable)
2. Computation of the price variance:
Price variance = ( Standard rate - Actual rate ) × Actual quantity
Price variance = ( $0.92 - $0.85 ) × 16,000
Price variance = $1,120 (favorable)
3. Computation of efficiency variance:
Efficiency variance = [{(Actual output / Budgeted output )( Budgeted quantity)} - Actual quantity] × Standard rate
Efficiency variance = [{(59,200/ 59,000)(14,750)} - 16,000] × 0.92
Efficiency variance = [14,800 - 16,000] × 0.92
Efficiency variance = $1104 (unfavorable)