In 2018, the Montpazier brewery of Bires Ronsard showed these results: The sales division of Bires Ronsard
Question:
In 2018, the Montpazier brewery of Bières Ronsard showed these results:
The sales division of Bières Ronsard purchased 240,0000 barrels in 2018 at the € 68 per barrel rate.
All manufacturing variances are written off to cost of goods sold in the period in which they are incurred.
Required
1. Calculate the operating profit of the Montpazier brewery using the following: (a) theoretical capacity, (b) practical capacity and (c) normal utilisation denominator-level concepts. Explain any differences among (a), (b) and (c).
2. What denominator-level concept would Bières Ronsard prefer for income tax reporting? Explain.
3. Explain the ways in which the tax office might restrict the flexibility of a company like Bières Ronsard, which uses absorption costing, to reduce its reported taxable income.
Step by Step Answer:
Management And Cost Accounting
ISBN: 9781292232669
7th Edition
Authors: Alnoor Bhimani, Srikant M. Datar, Charles T. Horngren, Madhav V. Rajan