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Water filers Inc provides water filters for residential and commercial customers. Product Alpha7xtr is the flagship product of the company. The raw material required to
Water filers Inc provides water filters for residential and commercial customers. Product Alpha7xtr is the flagship product of the company. The raw material required to manufacture the product is Zincalloy which is a very hard to get material. Thus the company has to maintain large amounts of material in stock. Currently, the standard cost of Zincalloy is $2.90 per gram. During May, 25,000 grams were purchased for $3.10 per gram, while only 20,000 grams were used in production. There was no beginning inventory. Required: 1. Determine the direct materials rate variance, assuming that all materials costs are the responsibility of the materials purchasing manager so rate variances are based on purchase quantities. 3 Marks 2. Determine the direct materials rate variance, assuming that all materials costs are the responsibility of the production manager so rate variances are determined as quantities are placed into production. 3 Marks c. Discuss the issues involved in determining the rate variance at the point of purchase versus the point of consumption. 4 Marks
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