Grffiths Company planned to make 500,000 cans of pasta sauce and spend $250,000

Question

Grffiths Company planned to make 500,000 cans of pasta sauce and spend $250,000 on tomatoes during November. However, demand was weak due to increased competition, and only 450,000 cans of pasta sauce were produced. The actual cost incurred was $230,000. Tomato prices were as expected during the period. Which of the following statements would be a fair statement regarding Grffiths' performance on tomato usage?
Answer


Grffiths was under flexible budget by $20,000 and did a good job controlling costs.

Grffiths was over budget by $5,000 and did a poor job of controlling costs.

Grffiths' flexible budget for tomatoes for performance evaluation should have been $250,000.

Both a and c are correct

Explanation / Answer

Grffiths was over budget by $5,000 and did a poor job of controlling costs.

$250,000 / 500,000 = 0.50 per can
For 450,000 cans 450,000 x 0.50 = $225,000 whereas Grffiths incurred $230,000.

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