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Class Activity 3

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

Class Activity 4

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.