Fortune Lager has just purchased the Chicago Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Fortune Lager at $45 per barrel. Peter Bryant, Fortune Lager's controller, obtains the following information about Chicago Brewery's capacity and budgeted fixed manufacturing costs for 2017: (Click the icon to view the information.) Read the requirements. Requirement 1. Compute the budgeted fixed manufacturing overhead rate per barrel for each of the denominator-level capacity concepts. Explain why they are different. Begin by determing the formula to calculate the budgeted fixed manufacturing overhead rate per barrel, then compute the rate for each of the denominator-level capacity concepts. (Abbreviations used: Budg. = budgeted, MOH = manufacturing overhead. Round the rates to the nearest cent.) Budgeted fixed Budg. fixed MOH per period Budg. denominator level (barrels) = MOH rate per barrel Theoretical capacity Data table Denominator-Level Capacity Concept Budgeted Fixed Manufacturing Overhead per Period Days of Hours of Production Production Barrels per per Period per Day Hour Theoretical capacity $ 27,700,000 362 Practical capacity $ 27,700,000 352 20 Normal capacity utilization $ 27,700,000 352 222 530 495 405 Master-budget capacity utilization for each half year: (a) January-June 2017 $ 13,850,000 176 20 320 (b) July-December 2017 $ 13,850,000 176 20 490 Print Done Requirements 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 Chicago Brewery reported these production results: Beginning inventory in barrels, 1-1-2017 Production in barrels Ending inventory in barrels, 12-31-2017 Actual variable manufacturing costs 0 2,600,000 190,000 $ 78,130,000 Actual fixed manufacturing overhead costs $ 27,000,000 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 Chicago Brewery's operating income when the denominator-level capacity is (a) theoretical capacity, (b) practical capacity, and (c) normal capacity utilization. Print Done