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.

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1. Production Sales.......... 2. Production 20,000 units 23,000 units 10,000 units Sales 10,000 units 3. Production........ 11,000 units Sales 9,000 units