Santana Rey expects sales of her line of computer workstation furniture to equal 300 workstations (at a sales price of $3,000) for 2016. The workstations' manufacturing costs include the following.

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $800 per unit

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400 per unit

Variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100 per unit

Fixed overhead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,000 per year

The selling expenses related to these workstations follow.

Variable selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50 per unit

Fixed selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,000 per year

Santana is considering how many workstations to produce in 2016. She is confident that she will be able to sell any workstations in her 2016 ending inventory during 2017. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations.

Required

1. Compute Business Solutions's absorption costing income assuming

a. 300 workstations are produced.

b. 320 workstations are produced.

2. Compute Business Solutions's variable costing income assuming

a. 300 workstations are produced.

b. 320 workstations are produced.

3. Explain to Santana any differences in the income figures determined in parts 1 and 2. How should Santana use the information from parts 1 and 2 to help make production decisions?