In 2022, the Montpazier brewery of Bires Ronsard showed these results: The sales division of Bires Ronsard

In 2022, the Montpazier brewery of Bières Ronsard showed these results:

The sales division of Bières Ronsard purchased 2 400 000 barrels in 2022 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.

Transcribed Image Text:

Unit data in barrels Opening stock, 1 January 2022 Production Closing stock, 31 December 2022 The Montpazier brewery had actual costs of: Cost data Variable manufacturing Fixed manufacturing overhead 0 2 600 000 200 000 120 380 000 40 632 000