Question

AC 223 Cost Accounting Hien Au & 10/17/18 922 PM Homework: Chapter 9 Homework Save core: 2.82 of 6 pts 3 of 5 14 complete) Hw Score: 48.68%,14.61 of 30 pe P9-37 (similar to) Question Hep ts product to Lucky Lager at $42 per banel Peter Bryant, Lucky Lager's coneroler, obtains the fellowing information Lucky Lager has just purchased the Pitsburgh Brewery. The brewery is two years old and uses absorption costng. w"s about Pittsburgh Brewery's capacity and budgeted fxed manufacturing costs for 2017 EB (Click the lcon to view the information) Read the requirements

Answer 1

1.

Denominator-Level Capacity Concept	Budgeted Fixed Manufacturing Overhead per Period	Number of Barrels	Budgeted Fixed Manufacturing Overhead Rate per Barrel
Theoretical Capacity	$ 28,300,000	5,212,800	$ 5.43
Practical Capacity	$ 28,300,000	3,500,000	8.09
Normal Capacity Utilization	$ 28,300,000	2,835,000	9.98
Master Budget Capacity Utilization	$ 14,150,000 $ 14,150,000	2,835,000	9.98

The budgeted fixed manufacturing overhead rate is different in each case because the denominator is different for each type of capacity, while the numerator remains unchanged.

2.

	Theoretical Capacity	Practical Capacity	Normal Capacity Utilization
Unit Sales	2,440,000	2,440,000	2,440,000
Sales Revenue	$ 102,480,000	$ 102,480,000	$ 102,480,000
Less: Cost of Goods Sold
Variable Cost of Goods Sold	73,322,000	73,322,000	73,322,000
Fixed Manufacturing Overhead	13,249,200	19,739,600	24,351,200
Cost of Goods Sold ( Unadjusted	86,571,200	93,061,600	97,673,200
Adjustment for under/ over recovery of fixed manufacturing overhead	12,356,884	5,866,484	1,254,884
Cost of Goods Sold ( Adjusted)	98,928,084	98,928,084	98,928,084
Operating Income	$ 3,551,916	$ 3,551,916	3,551,916

Unit sales = Beginning inventory + Production - Ending Inventory = 0 + 2,630,000 - 190,000 = 2,440,000 barrels.

Sales revenue = 2,440,000 x $ 42 = $ 102,480,000.

Variable cost of goods sold = ($ 79,031,500 / 2,630,000 ) * 2,440,000 = $ 73,322,000.