eparo dont because of seasonal differences in budgeted production Requirement 2. Compute the Buffalo Brewery's operating income when the denominator-level capacity is (a) theoretical capacity, (b) practical capacity, and (c) normal capacity utilization Begin by completing the following table to help you compute the operating income for each denominator-level capacity concept. (Round the rates to the nearest cent) Budgeted fixed MOH rate Per barrel Budgeted variable mig Budgeted total mig cost rato Denominator level capacity concept Theoretical capacity Fixed MOH per barrel cost rate costs allocated 666 Zing Lager has just purchased the Buffalo Brewery. The brewery is two years old and uses absorption costing. It will sell its product to Zing Lager at $46 per barrel. Peter Bryant, Zing Lager's controller, obtains the following information about Buffalo Brewery's capacity and budgeted fixed manufacturing costs for 2017 (Click the icon to view the information) Read the requirements Begin by determing the formula to calculate the budgeted fixed manufacturing overhead rato per barrel, then compute the rate for each of the denominator-love! capacity concepts. (Abbreviations used: Budg. - budgeted, MOH - manufacturing overhead. Round the rates to the nearest cent.) Budgeted fored Budg fixed MOH per period Buda denominator level (barrels) MOH rate per barrel Theoretical capacity $ 27.700,000 4,158,000 - $ 6.66 Practical capacity $ 27,700,000 3.484,800 $ 7.95 Normal capacity utilization $ 27,700,000 2,851,200 $ 9.72 Master budget capacity for each half year (a) January-June 2017 $ 13.850,000/ 1,196,800 $ 11 57 (6) July December 2017 13,850.000 1,654,400 = 5 8.37 Explain why they are different The theoretical and practical capacity concepts emphasize supply factors, while normal capacity utilization and master budget utilization concepts emphasize demand factors The sa-month rates for the master budget utilization concept are different because of seasonal differences in budgeted production Data Table 1 > Budgeted Fixed Days of Hours of Manufacturing Production Production Barrels Overhead per Period per Period per Day $ 27,700,000 350 22 540 $ 27,700,000 352 20 495 $ 27,700,000 352 20 405 Denominator-Level Capacity Concept Theoretical capacity Practical capacity Normal capacity utilization Master-budget capacity for each half year (a) January-- June 2017 (b) July-December 2017 per Hour $ all 176 13,850,000 13,850,000 340 $ 20 20 ,176 470 nd th Print Done tes to the master ouageruzation concept are anerent because or seasonaromerences in budgeted producto er in the edit fields and then click Check Anewer ements Requirements 21 of 1. Compute the budgeted fixed manufacturing overhead rate per barrel for each of the denominator-level capacity concepts. Explain why they are different. 2. In 2017, the Buffalo Brewery reported these production results: Beginning inventory in barrels, 1-1-2017 0 Production in barrels 2,650,000 Ending inventory in barrels, 12-31-2017 230,000 Actual variable manufacturing costs $ 80,560,000 Actual fixed manufacturing overhead costs $ 27,300,000 There are no variable cost variances. Fixed manufacturing overhead cost variances are written off to cost of goods sold in the period in which they occur. Compute the Buffalo Brewery's operating income when the denominator-level capacity is (a) theoretical capacity. (b) practical capacity, and (c) normal capacity utilization. Print Done at fields and then click Check
