Bianca Bicycle Company manufactures mountain bikes with a variable cost of $1,100
Bianca Bicycle Company manufactures mountain bikes with a variable cost of $1,100. The bicycles sell for $1,850 each. Budgeted fixed manufacturing overhead for the most recent year was $11,100,000. Planned and actual production for the year were the same.
Required:
State whether income is higher under variable or absorption costing and the amount of the difference in reported opearting income under the two methods. Treat each condition as an independent case. (Round intermediate calculations to 2 decimal places.)
Homework Answers
1) income under variable costing will be higher than absorption costing by (11,100,000/22100*3100) = 1,557,013.57
2) income under variable costing and absorption costing will be same = -3,000,000
3)income under absorption costing is higher than variable costing by (11,100,000/11150*1300) = 1,294,170.40
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