Apple's ending inventory amounts (in $ millions) are shown below:

______________________          __2013 _________2012 ________2011

ending inventory . . . . . . . . . $1,764 ………… $791 ……….. $776

Required

1. Assume Apple uses variable costing for some of its internal reports. For each of the years 2013 and 2012, would net income based on variable costing be higher, lower, or no different from net income based on absorption costing? Explain.

2. Assume Apple is considering implementing a just-in-time (JIT) inventory system. Would a JIT system increase, decrease, or have no effect on differences in net income between absorption costing and variable costing? Explain.