Bianca Bicycle Company manufactures mountain bikes with a variable cost of $200. The bicycles sell for $350 each. Budgeted fixed manufacturing overhead for the most recent year was $2,200,000. Planned and actual production for the year were the same.
Required: Under each of the following conditions, state (a) whether income is higher under variable or absorption costing and (b) the amount of the difference in reported income under the two methods. Treat each condition as an independent case.
1. Production | 20,000 units |
Sales | 23,000 units |
2. Production | 10,000 units |
Sales | 10,000 units |
3. Production | 11,000 units |
Sales | 9.000 units |
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