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a. Theoretical capacitybased on two shifts, completion of four motorcycles per shift, and a 360-day year2 x 4 x 360 = 2,880. b. Practical capacitytheoretical
a. Theoretical capacitybased on two shifts, completion of four motorcycles per shift, and a 360-day year2 x 4 x 360 = 2,880. b. Practical capacitytheoretical capacity adjusted for unavoidable interruptions, breakdowns, and so forth2 x 3 x 320 = 1,920. c. Normal capacity utilizationestimated at 1,200 units. d. Master-budget capacity utilizationthe strengthening stock market and the growing popularity of motorcycles have prompted the marketing department to issue an estimate for 2017 of 1,500 units. Thunder Bolt, Inc., is a manufacturer of the very popular G36 motorcycles. The management at Thunder Bolt has recently adopted absorption costing and is debating which denominator-level concept to use. The G36 motorcycles sell for an average price of $8,400. Budgeted fixed manufacturing overhead costs for 2017 are estimated at $3,168,000. Thunder Bolt, Inc., uses subassembly operators that provide component parts. The following are the denominator-level options that management has been considering: (Click the icon to view the options.) Read the requirements. Requirement 1. Calculate the budgeted fixed manufacturing overhead cost rates under each concept. (Round your answers to two decimal places.) Budgeted fixed Denominator level manufacturin Requirements capacity concept overhead cost rate Theoretical 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? What are the positive aspects? Print Done
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