Operating profit effects of alternative denominator-level concepts (continuation of 7-16). (30 minutes) In 2000, the Montpazier brewery of Bieres Ronsard showed these results: lopu8

The sales division of Bieres Ronsard purchased 2,400,000 barrels in 2000 at the FFr 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).
What denominator-level concept would Biéres Ronsard prefer for income tax reporting? Explain.
Explain the ways in which the Internal Revenue Service might restrict the flexibility of a company like Bieres Ronsard, which uses absorption costing, to reduce its reported taxable income.

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Unit data in barrels Opening stock, 1 January 2000 Production Closing stock, 31December 2000 The Montpazier brewery had actual costs of: Cost data Variable manufacturing Fixed manufacturing overhead 2,600,000 200,000 FFr 120,380,000 FFR 40,632,000 The sales division of Bires Ronsard purchased 2,400,000 barrels in 2000 at the FFr 68 per barrel rate. All manufacturing variances are written off to cost of goods sold in the period in which they are incurred.