=+7-30 KK Capacity concept choices, changes in inventory levels, effect on operating profit OBJECTIVE 7 Yuki Ltd is a manufacturer of computer accessories. It uses absorption costing and reports the following data for 2014:

1 2

3 4

5 6

7 8

9 10 A B C yticapac laciteroehT stinu000 280 yticapac lacitcarP stinu000 224 utilisation yticapac lamroN stinu000 200 ecirp gnilleS tinu rep04$

yrotnevni gninnigeB stinu000 20 noitcudorP stinu000 220 emulov selaS stinu000 230 Variable budgeted manufacturing cost Total budgeted fixed manufacturing costs Total budgeted operating (non-manuf.) costs (all fixed) $900 000

$2 800 000

$5 per unit Actual operating costs equal budgeted operating costs. The cost of unused capacity is written off to cost of goods sold. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory.

Required 1 What is the cost of unused capacity in 2014 when the denominator level is:

(a) theoretical capacity,

(b) practical capacity and

(c) normal capacity utilisation?