Home Insert Page Layout Formulas Data Review View B Budgeted Fixed Manufacturing Overhead per Period $27,900,000 $27,900,000 $27,900,000 Days of Hours of 2 Denominator-Level Production Production Barrels per Period 358 Capacity Concept 4 Theoretical capacity 5 Practical capacity 6 Normal capacity utilization Master-budget capacity utilization 7 for each half year: 8 (a) January-June 2017 9 (b) July–December 2017 per Day 22 per Hour 545 3 348 20 510 348 20 410 $13,950,000 $13,950,000 174 20 315 174 20 505 1. Compute the budgeted fixed manufacturing overhead rate per barrel for each of the denominator-level capacity concepts. Explain why they are different. 2. In 2017, the Jacksonville Brewery reported these production results: Required Home Insert Page Layout Formulas Data |12 Beginning inventory in barrels, 1-1-2017 13 Production in barrels |14 Ending inventory in barrels, 12-31-2017 15 Actual variable manufacturing costs | 16 Actual fixed manufacturing overhead costs 2,670,000 210,000 $80,634,000 $26,700,000 There are no variable cost variances. Fixed manufacturing overhead cost variances are written off to cost of goods sold in the period in which they occur. Compute the Jacksonville Brewery's operating income when the denominator-level capacity is (a) theoretical capacity, (b) practical capacity, and (c) normal capacity utilization.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Alternative denominator-level capacity concepts, effect on operating income. Castle Lager has just purchased the Jacksonville Brewery. The brewery is two years old and uses absorption costing. It will “sell” its product to Castle Lager at $47 per barrel. Peter Bryant, Castle Lager’s controller, obtains the following information about Jacksonville Brewery’s capacity and budgeted xed manufacturing costs for 2017:

Home
Insert
Page Layout
Formulas
Data
Review
View
B
Budgeted Fixed
Manufacturing
Overhead per Period
$27,900,000
$27,900,000
$27,900,000
Days of
Hours of
2
Denominator-Level
Production
Production
Barrels
per Period
358
Capacity Concept
4 Theoretical capacity
5 Practical capacity
6 Normal capacity utilization
Master-budget capacity utilization
7 for each half year:
8 (a) January-June 2017
9 (b) July–December 2017
per Day
22
per Hour
545
3
348
20
510
348
20
410
$13,950,000
$13,950,000
174
20
315
174
20
505
1. Compute the budgeted fixed manufacturing overhead rate per barrel for each of the denominator-level
capacity concepts. Explain why they are different.
2. In 2017, the Jacksonville Brewery reported these production results:
Required
Home
Insert
Page Layout
Formulas
Data
|12 Beginning inventory in barrels, 1-1-2017
13 Production in barrels
|14 Ending inventory in barrels, 12-31-2017
15 Actual variable manufacturing costs
| 16 Actual fixed manufacturing overhead costs
2,670,000
210,000
$80,634,000
$26,700,000
There are no variable cost variances. Fixed manufacturing overhead cost variances are written off to cost of
goods sold in the period in which they occur. Compute the Jacksonville Brewery's operating income when
the denominator-level capacity is (a) theoretical capacity, (b) practical capacity, and (c) normal capacity
utilization.

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