Global Bike Inc. (GBI) manufactures and sells premium bicycle frames. The selling price per bicycle frame is $4,200. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 900 units. There are no price, efficiency, or spending variances. GBI uses standard costing and reports the following actual data relating to January 2020:

a) Calculate GBIs operating income for January 2020 under variable costing.

b) Calculate GBIs operating income for January 2020 under absorption costing.

c) Provide a short explanation for the difference in operating income for January 2020 under variable and absorption costing

January 2020 0 900 750 Unit data: Beginning inventory Production Sales Variable costs: Manufacturing cost per unit produced Operating cost per unit sold Fixed costs: Manufacturing costs Operating costs $2,300 $750 $450,000 $120,000