VP9-37 (similar to) Question Hel Tolman Lager has just purchased the Chicago Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Tolr Lager at $44 per barrel. Peter Bryant, Tolman Lager's controller, obtains the following information about Chicago Brewery's capacity and budgete 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. Expla 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 C Budgeted fixed /Budg. denominator level (barrels) Budg. fixed MOH per period MOH rate per barrel 27,700,000 4,604,640 6.02 Theoretical capacity 27,700,000 3,469,200 7.98 Practical capacity = 27,700,000 2,761,200 10.03 Normal capacity utilization Master-budget capacity for each half year: (a) January June 2017 13,850,000 1,132,800 12.23 13,850,000 1,628,400 $ 8.51 (b) July-December 2017 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 six-month rates for the master-budget utilization concept are different because of seasonal differences in budgeted production EA EA II Tolman Lager has just purchased the Chicago Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Tolma Lager at $44 per barrel. Peter Bryant, Tolman Lager's controller, obtains the following information about Chicago Brewery's capacity and budgeted manufacturing costs for 2017 (Click the icon to view the information.) Read the requirements Requirement 2. Compute the Chicago 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 t the nearest cent.) Per barrel Budgeted fixed Budgeted Budgeted rate total mfg variable mfg Denominator-level Fixed MOH capacity concept per barrel costs allocated cost rate cost rate 36.07 $ 30.05 $ 6.02 $ 15,531,600 Theoretical capacity 7,98 30.05 38.03 20,588,400 Practical capacity 10.03 30.05 40.08 25,877,400 Normal capacity utilization Now compute the operating income for each capacity concept, one at a time. Label the variances as favorable (F) or unfavorable (U). (Enter a "0" any zero balance accounts.) Now compute the operating income for each capacity concept, one at a time. Label the variances as favorable (F) or unfavorable (U). (Enter a "O" fo any zero balance accounts.) Theoretical capacity 113520000 Revenues Cost of goods sold 0 Beginning inventory 77,529,000 Variable manufacturing costs 15,531,600 Fixed manufacturing overhead cost allocated 93,060,600 Cost of goods available for sale (7,214,000) Deduct ending inventory Adjustment for variances Cost of goods sold Gross margin Other costs Operating income Choose from any list or enter any number in the input fields and then click Check Answer Budgeted Fixed Days of Hours of Manufacturing Denominator-Level Production Production Barrels Capacity Concept Overhead per Period per Period per Day per Hour Theoretical capacity 27,700,000 362 24 530 Practical capacity 27,700,000 354 20 490 Normal capacity utilization 27,700,000 354 20 390 Master-budget capacity for each half year (a) January-June 2017 13,850,000 177 20 320 (b) July-December 2017 13,850,000 177 20 460 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 2,580,000 Ending inventory in barrels, 12-31-2017 200,000 $ 77,529,000 Actual variable manufacturing costs $ 26,600,000 Actual fixed manufacturing overhead costs 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 There are capacity, and (c) normal capacity utilization. VP9-37 (similar to) Question Hel Tolman Lager has just purchased the Chicago Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Tolr Lager at $44 per barrel. Peter Bryant, Tolman Lager's controller, obtains the following information about Chicago Brewery's capacity and budgete 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. Expla 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 C Budgeted fixed /Budg. denominator level (barrels) Budg. fixed MOH per period MOH rate per barrel 27,700,000 4,604,640 6.02 Theoretical capacity 27,700,000 3,469,200 7.98 Practical capacity = 27,700,000 2,761,200 10.03 Normal capacity utilization Master-budget capacity for each half year: (a) January June 2017 13,850,000 1,132,800 12.23 13,850,000 1,628,400 $ 8.51 (b) July-December 2017 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 six-month rates for the master-budget utilization concept are different because of seasonal differences in budgeted production EA EA II Tolman Lager has just purchased the Chicago Brewery. The brewery is two years old and uses absorption costing. It will "sell" its product to Tolma Lager at $44 per barrel. Peter Bryant, Tolman Lager's controller, obtains the following information about Chicago Brewery's capacity and budgeted manufacturing costs for 2017 (Click the icon to view the information.) Read the requirements Requirement 2. Compute the Chicago 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 t the nearest cent.) Per barrel Budgeted fixed Budgeted Budgeted rate total mfg variable mfg Denominator-level Fixed MOH capacity concept per barrel costs allocated cost rate cost rate 36.07 $ 30.05 $ 6.02 $ 15,531,600 Theoretical capacity 7,98 30.05 38.03 20,588,400 Practical capacity 10.03 30.05 40.08 25,877,400 Normal capacity utilization Now compute the operating income for each capacity concept, one at a time. Label the variances as favorable (F) or unfavorable (U). (Enter a "0" any zero balance accounts.) Now compute the operating income for each capacity concept, one at a time. Label the variances as favorable (F) or unfavorable (U). (Enter a "O" fo any zero balance accounts.) Theoretical capacity 113520000 Revenues Cost of goods sold 0 Beginning inventory 77,529,000 Variable manufacturing costs 15,531,600 Fixed manufacturing overhead cost allocated 93,060,600 Cost of goods available for sale (7,214,000) Deduct ending inventory Adjustment for variances Cost of goods sold Gross margin Other costs Operating income Choose from any list or enter any number in the input fields and then click Check Answer Budgeted Fixed Days of Hours of Manufacturing Denominator-Level Production Production Barrels Capacity Concept Overhead per Period per Period per Day per Hour Theoretical capacity 27,700,000 362 24 530 Practical capacity 27,700,000 354 20 490 Normal capacity utilization 27,700,000 354 20 390 Master-budget capacity for each half year (a) January-June 2017 13,850,000 177 20 320 (b) July-December 2017 13,850,000 177 20 460 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 2,580,000 Ending inventory in barrels, 12-31-2017 200,000 $ 77,529,000 Actual variable manufacturing costs $ 26,600,000 Actual fixed manufacturing overhead costs 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 There are capacity, and (c) normal capacity utilization
