Reference no: EM133039556

Problem 1 - X Ltd makes widgets. It has no opening inventory -

Budgeted and actual fixed manufacturing costs are $100,000

Budgeted and actual fixed non- manufacturing costs are $40,000

Budgeted and actual production are 10,000 units

Variable manufacturing cost was $30 per unit

Variable non-manufacturing cost was $5 per unit sold

X Ltd sold 9,000 units at $60 per unit

Calculate the Operating Income according to both Absorption and Variable costing and explain the difference.

Problem 2 - Y Ltd makes gadgets.

It has no opening inventory

Closing inventory was 600 units

Budgeted and actual fixed manufacturing costs are $800

Budgeted and actual production is 1600 units

Variable manufacturing cost was $1.50 per unit

The selling price was $5 per unit

Sales commissions of 5% of sales revenue are paid to sales people Other non-manufacturing fixed costs total $300.

Calculate the Operating Income according to both Absorption and Variable costing and explain the difference.