Lucky Lager has just purchased the Austin Brewery. The brewery is two years old and uses absorption costing. It will “sell” its products to Lucky Lager at $45 per barrel. Paul Brandon, Lucky Lager’s controller, obtains the following information about Austin Brewery’s capacity and budgeted fixed manufacturing costs for 2012: Budgeted Fixed MOH per period Days of Production per period Hours of production per day Barrels per hour Theoretical capacity $28,000,000 360 24 540 Practical capacity $28,000,000 350 20 500 Normal capacity utilization $28,000,000 350 20 400 Master-Budget capacity for each half year: a) January – June 2012 b) July – December 2012 $14,000,000 $14,000,000 175 175 20 20 320 480 In 2012, the Austin Brewery reported these production results: Beginning inventory in barrels, 1 January 2012: 0 Production in barrels: 2,600,000 Ending inventory in barrels, 31 December 2012: 200,000 Actual variable manufacturing costs: $78,520,000 Actual fixed MOH costs: $27, 088,000 There are no variable cost variances. Fixed MOH cost variances are written off to COGS in the period in which they occur. Prepare the Austin Brewery’s absorption costing Income Statement under both the periodic and perpetual system when the denominator-level capacity is Theoretical capacity Practical capacity Normal capacity utilization
Lucky Lager has just purchased the Austin Brewery. The brewery is two years old and uses absorption costing. It will “sell” its products to Lucky Lager at $45 per barrel. Paul Brandon, Lucky Lager’s controller, obtains the following information about Austin Brewery’s capacity and budgeted fixed
|
|
Budgeted Fixed MOH per period |
Days of Production per period |
Hours of production per day |
Barrels per hour |
|
Theoretical capacity |
$28,000,000 |
360 |
24 |
540 |
|
Practical capacity |
$28,000,000 |
350 |
20 |
500 |
|
Normal capacity utilization |
$28,000,000 |
350 |
20 |
400 |
|
Master-Budget capacity for each half year: a) January – June 2012 b) July – December 2012 |
$14,000,000 $14,000,000 |
175 175 |
20 20 |
320 480
|
- In 2012, the Austin Brewery reported these production results:
Beginning inventory in barrels, 1 January 2012: 0
Production in barrels: 2,600,000
Ending inventory in barrels, 31 December 2012: 200,000
Actual variable manufacturing costs: $78,520,000
Actual fixed MOH costs: $27, 088,000
There are no variable cost variances. Fixed MOH cost variances are written off to COGS in the period in which they occur.
Prepare the Austin Brewery’s absorption costing Income Statement under both the periodic and perpetual system when the denominator-level capacity is
- Theoretical capacity
- Practical capacity
- Normal capacity utilization
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