Reference no: EM132607579
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
Question (a) whether operating income is higher under variable or absorption costing and
Question (b) the amount of the difference in reported operating 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