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Calculate the operating income according to absorption

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Problem - 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.

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

Reference no: EM132472180

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