9-25 Denominator-level problem. Thunder Bolt. Inc., is a manufacturer of the very popular 636 motorcycles. The management at Thunder Belt has recently adopted absorption costing and is debating which denominator-level concept to use. The [536 motorcycles sell for an average price of $8.200. Budgeted fixed manufacturing overhead costs for 2014 are estimated at$6.llli.0m. Thunder Bolt, Inc.. uses suhassembly operators that provide component parts. The following are the denominator-level options that management has been considering: a. Theoretical capacitybased on three shifts, completion of five motorcycles per shift, and a EEO-day year3 5 360 5.401]. b. Practical capacitytheoretical capacity adjusted for unavoidable interruptions, breakdowns, and so forth3 4 320 3.840. c. Normal capacity utiizationeso'mated at 3,240 units. d. Master-budget capacity utilizationthe strengthening stock market and the growing popularity of motorcycles have prompted the marketing depertmentto issue an estimate for 2014 oi 3300 units. 1. Calculate the budgeted fixed manufacturing overhead cost rates under the four denominator-level concepts. 2. What are the benefits to Thunder Bolt, Inc., of using either theoretical capacity or practical capacity? 3. Under a cost-based pricing system. what are the negative aspects of a master-budget denominator level? |J'v'hat are the positive aspects