Question
I cant solve the following exercise. Bianca Bicycle Company manufactures mountain bikes with a variable cost of $200. The bicycles sell for $350 each. Budgeted
I cant solve the following exercise.
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 income is higher under variable or absorption costing and ( b ) the amount of the difference in reported 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
Refer to the data given in the preceding exercise for Bianca Bicycle Company. Required: 1. Prepare a cost-volume-profit graph for the company. (Scale the vertical axis in millions of dollars, and draw the CVP graph up through 15,000 units on the horizontal axis.) 2. Calculate Bianca Bicycle Company's break-even point in units, and show the break-even point on the CVP graph. 3. Explain why variable costing is more compatible with your CVP graph than absorption costing would be.
Thanks in advance.
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