Comfort Company produces leather office chairs. The standard cost per chair is as follows:

During 2017, Comfort Company produced and sold 12,000 office chairs. Management believes that the denominator level of activity represents 75% of theoretical capacity and 80% of practical capacity.

Required:

1. Calculate the total overhead costs at the following levels of activity: theoretical, practical, denominator, and actual (2017).

2. Assuming Comfort Company can sell all of the chairs it can produce for $100 per unit, calculate the opportunity loss of producing 12,000 chairs in 2017 compared to the following capacity utilization alternatives: theoretical, practical, and denominator.

Transcribed Image Text:

$35 Direct materials Direct labour 15 Variable overhead (2 machine-hours at $4.00)* Fixed overhead (2 machine-hours at $8.00)* Total standard cost per chair 16 $74 *Overhead rates are based on a denominator activity level of 30,000 machine-hours.