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 operating income is higher under variable or absorption costing and (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 unitsSales .............................................................. 23,000 units2. Production ..................................................... 10,000 unitsSales .............................................................. 10,000 units3. Production ..................................................... 11,000 unitsSales .............................................................. 9,000 units

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 operating income is higher under variable or absorption costing and (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

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