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Tasty Lager has just purchased the Cleveland Brewery. The brewery is two years old and uses absorption costing. It will sell its product to

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Tasty Lager has just purchased the Cleveland Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Tasty Lager at $46 per barrel. Peter Bryant, Tasty 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. 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.) Data table = Budgeted fixed MOH rate per barrel Budgeted Fixed Manufacturing Denominator-Level Capacity Concept Overhead per Period Days of Production per Period Hours of Production Barrels per per Day Hour Theoretical capacity $ 28,300,000 350 24 535 Practical capacity $ 28,300,000 354 20 520 Normal capacity utilization $ 28,300,000 354 20 395 Master-budget capacity utilization for each half year: (a) January-June 2017 $ 14,150,000 177 20 (b) July-December 2017 $ 14,150,000 177 20 22 320 470 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 2,630,000 180,000 $ 79,820,500 Actual fixed manufacturing overhead costs $ 26,800,000 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. >

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