Mountainbikes Company manufactures a basic road bicycle. Production and sales data for the most recent year are as follows (there is no beginning inventory): Variable production costs $90 per bike Fixed production costs $500,000 Variable selling and administrative costs $22 per bike Fixed selling and administrative costs $520,000 Selling price $200 per bike Production 20,000 bikes Sales 18,000 bikes Instructions

1. Complete a CVP income statement for Mountainbikes using variable costing.

2. Compute the amount to be reported for inventory in the year-end variable costing balance sheet.

3. Using the data given above, calculate the following: if Mountainbikes Company switched from variable to absorption costing, and its relevant fixed costs were applied pro-rata to the number of units produced, what would be the value of inventory in the balance sheet at year-end? 1