Problem 1

Snow Products Corporation makes two products, titanium Rims and Posts. Additional information about the company follows:

a. Rims require $17 in direct materials per unit, and Posts require $10.

b. The direct labour wage rate is $16 per hour.

Following are the data regarding the two products and ABC costing:

Data Regarding the two product follows

Direct Labor-hour per unit

Annual

Production

Rims

0.5

20,000

Posts

0.3

80,000

Activity Cost pool:

Activity

Activity cost pool (and activity

measure)

Estimated

Overhead costs

Rims

Posts

Total

Machine setups (number of

setups)

20,000

70

90

160

Special

Processing

(machine hours)

200,000

3,000

1,000

4,000

General factory (direct labor

hours)

300,000

10,000

24,000

34,000

Required:

Determine the total cost of Rims according to the ABC system. Show details of your work.

1

Problem 2

Tyrion Company has the following budgeted production for the 2nd quarter ending on June 30.

Budgeted Production

April May June Quarter

40,000

50,000

60,000

150,000

Each unit requires 3 pounds of raw material that costs $5.00 per pound. Management desires to end each month with an inventory of raw materials equal to 20% of the following month's production needs. The desired ending inventory for June is 40,000 pounds. Management plans to pay for 60% of raw material purchases in the month acquired and 40% in the following month.

In addition, the beginning raw materials inventory for April is budgeted to be 24,000 pounds and the beginning accounts payable for April is budgeted to be $50,820.

Required:

a. Prepare the company's direct materials budget and schedule of expected cash disbursements for purchases of materials for the 2nd quarter ending in June.

b. If the actual cost of material purchased is $4.5 per pound and 4 pounds of raw materials were purchased for manufacturing each unit of product. Compute the materials price variance for one unit of product from the budgeted standard.