Crane Companys produces brass faucets and has the following standard costs per faucet:

Direct materials $55.00

Direct labour 22.50

Variable overhead (0.75 direct labour hours at $10)* 7.50

Fixed overhead (0.75 direct labour hours at $16)* 12.00

Total standard cost per faucet $97.00

*overhead rates are based on a denominator activity level of 6,000 direct labour hours

During 2021, Crane Company produced and sold 7,700 faucets.

The denominator level of activity represents 60% of theoretical capacity and 75% of practical capacity.

Required:

1. Calculate the total overhead costs at the theoretical, practical, denominator and actual level of activity. (11 marks)

2. Crane Company can sell the faucets it produces for $175 per unit, calculate the opportunity cost of producing 7,700 faucets in 2021 compared to theoretical, practical and denominator capacity utilization. (7 marks)