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