Budgeted Fixed Manufacturing Overhead Rate for Chicago Brewery
What is the budgeted fixed manufacturing overhead rate per barrel for each of the denominator-level capacity concepts for Chicago Brewery? Why are they different?
For Chicago Brewery, the budgeted fixed manufacturing overhead rate per barrel for each denominator-level capacity concept is as follows: The budgeted fixed manufacturing overhead rate (BFMOR) for Theoretical Capacity is $2.57/barrel. The budgeted fixed manufacturing overhead rate (BFMOR) for Practical Capacity is $2.57/barrel. The budgeted fixed manufacturing overhead rate (BFMOR) for Normal Capacity Utilization is $2.57/barrel. The formula to calculate the BFMOR per barrel for each concept is dividing the Budgeted Fixed Manufacturing Overhead for that capacity by the number of barrels at that capacity.Budgeted Fixed Manufacturing Overhead Rate Calculation:
Explanation of Different Rates:
The reason why the budgeted fixed manufacturing overhead rates per barrel for each capacity concept are the same ($2.57/barrel) is because the fixed manufacturing costs allocated for these concepts remain constant regardless of the level of production.