5-9-37 Alternative denominator-level capacity concepts, effect on operating income. Castle Lager has just purchased the Jacksonville Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Castle Lager at $47 per barrel. Peter Bryant, Castle Lager's controller, obtains the following information about Jacksonville Brewery's capacity and budgeted fixed manufacturing costs for 2017: Home Insert A Page Layout Formulas B Data Review View C D E 1 2 Budgeted Fixed Denominator-Level Manufacturing Days of Production Hours of Production Barrels 3 Capacity Concept Overhead per Period per Period per Day per Hour 4 Theoretical capacity $27,900,000 358 22 545 5 Practical capacity $27,900,000 348 20 510 6 Normal capacity utilization $27,900,000 348 20 410 Master-budget capacity utilization 7 for each half year: 8 (a) January-June 2017 $13,950,000 174 6 (b) July-December 2017 $13,950,000 174 22220 315 505