Chapter 9, Problem 9.14Q

To determine

Denominator-level Capacity Concepts:

Denominator-level capacity concept is a term used to depict the capacity level that is considered for evaluation of business operations or production process. It uses theoretical capacity and practical capacity to analyze the production and normal capacity utilization and master budget capacity utilization to analyze customer demand.

To explain: The requirement for tax reporting based on the denominator-level capacity concept as per Internal Revenue Service (IRS).