Bires Ronsard SA recently purchased a brewing plant from a bankrupt company. The brewery is in Montpazier,

Bières Ronsard SA recently purchased a brewing plant from a bankrupt company. The brewery is in Montpazier, France. It was constructed only two years ago. The plant has budgeted fixed manufacturing overhead of €42 million (€3.5 million each month) in 2015. Alain Cassandre, the accountant of the brewery, must decide on the denominator-level concept to use in its absorption costing system for 2015. The options available to him are
a. Theoretical capacity: 600 barrels an hour for 24 hours a day × 365 days = 5 256 000 barrels.
b. Practical capacity: 500 barrels an hour for 20 hours a day × 350 days = 3 500 000 barrels.
c. Normal utilisation for 2015: 400 barrels an hour for 20 hours a day × 350 days = 2 800 000 barrels.
d. Master-budget utilisation for 2015 (separate rates calculated for each half-year):
• January to June 2015 budget: 320 barrels an hour for 20 hours a day × 175 days = 1 120 000 barrels
• July to December 2015 budget: 480 barrels an hour for 20 hours a day × 175 days = 1 680 000 barrels.
Variable standard manufacturing costs per barrel are €45 (variable direct materials, €32; variable manufacturing labour, €6; and variable manufacturing overhead, €7). The Montpazier brewery 'sells' its output to the sales division of Bières Ronsard at a budgeted price of €68 per barrel.
Required
1. Calculate the budgeted fixed manufacturing overhead rate using each of the four denominatorlevel concepts for (a) beer produced in March 2015 and (b) beer produced in September 2015. Explain why any differences arise.
2. Explain why the theoretical capacity and practical capacity concepts are different.
3. Which denominator-level concept would the plant manager of the Montpazier brewery prefer when senior management of Bières Ronsard is judging plant manager performance during 2015? Explain.