Bianca Bicycle Company manufactures mountain bikes with a variable cost of $208. The bicycles sell for $390 each. Budgeted fixed manufacturing overhead for the most recent year was $3,080,000. Planned and actual production for the year were the same.
1. Production 20,000 units
Sales 23,400 units
2. Production 10,800 units
Sales 10,800 units
3. Production 11,000 units
Sales 9,400 units
State whether income is higher under variable or absorption costing and the amount of the difference in reported income under the two methods. Treat each condition as an independent case. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
1. (Click to select)Same under bothVariable costingAbsorption costing $
2. (Click to select)Variable costingAbsorption costingSame under both $
3. (Click to select)Variable costingSame under bothAbsorption costing $
Solution is provided in a separate Excel file attached. It contains the following parts.
1 Data used in the problem Case 1 Case ...
The following posting helps with problems involving variable costing and absorption costing.