=+7-28 KK Capacity concepts, effect on operating profit OBJECTIVE 6 Lucky Lager has just purchased the Austin
Question:
=+7-28 KK Capacity concepts, effect on operating profit OBJECTIVE 6 Lucky Lager has just purchased the Austin Brewery. The brewery is two years old and uses absorption costing. It will ‘sell’ its product to Lucky Lager at $45 per barrel. Paul Brandon, Lucky Lager’s management accounatnt, obtains the following information about Austin Brewery’s capacity and budgeted fixed manufacturing costs for 2015:
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9 A B C D E Budgeted fixed Days of Hours of Denominator-level manufacturing production production Barrels capacity concept overhead per period per period per day per hour Theoretical capacity $28 000 000 360 24 540 Practical capacity $28 000 000 350 20 500 Normal capacity utilisation $28 000 000 350 20 400 Master-budget capacity for each half year
(a) January–June 2015 $14 000 000 175 20 320
(b) July–December 2015 $14 000 000 175 20 480 Required 1 Calculate the budgeted fixed manufacturing overhead rate per barrel for each of the denominator-level capacity concepts.
Explain why they are different.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan