Lucky Lager has just purchased the Cleveland Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Lucky Lager at $43 per barrel. Peter Bryant, Lucky Lager's controller, obtains the following information about Cleveland Brewery's capacity and budgeted fixed manufacturing costs for 2017: (Click the icon to view the information.) Read the requirements. Data table Budgeted Fixed Manufacturing Days of Hours of Production Production Barrels per Denominator-Level Capacity Concept Overhead per Period per Period per Day Hour Theoretical capacity $ 28,400,000 350 Practical capacity $ 28,400,000 354 20 Normal capacity utilization $ 28,400,000 354 20 222 24 530 505 395 Master-budget capacity utilization for each half year: (a) January-June 2017 $ 14,200,000 177 (b) July-December 2017 $ 14,200,000 177 220 320 470 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 Cleveland 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 2,650,000 200,000 $ 79,632,500 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 Cleveland Brewery's operating income when the denominator-level capacity is (a) theoretical capacity, (b) practical capacity, and (c) normal capacity utilization