Blackstone Tools produced 12,000 electric drills during 20X0. Expected production was only 10,500 drills. The company’s fixed-overhead rate is $7 per drill. Absorption-costing operating income for the year is $18,000, based on sales of 11,000 drills.

1. Compute the following:

a. Budgeted fixed overhead

b. Production-volume variance

c. Variable-costing operating income

2. Reconcile absorption-costing operating income and variable-costing operating income. Include the amount of the difference between the two and an explanation for the difference.