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