ABC Ltd. is a toy manufacturer that makes a D1 and a D2 Operating data for the D1 and the D2 for the month of June, Year 5, is as follows:

	D1	D2
Budgeted sales (units)	1,000	3,000
Expected selling price per unit	$60	$80
	D1	D2
Direct materials	$10	$25
Direct labour ($10 per direct labour hour)	$ 5	$ 5
Variable overhead ($20 per machine hour)	$10	$10
Fixed overhead ($30 per machine hour)	$15	$15
Standard cost per unit	$40	$55

Manufacturing overhead is allocated to the products based on machine hours, and an annual practical capacity of 24,000 machine hours is used in setting the fixed overhead rate. Variable selling and administrative costs are 5% of the selling price, and the total fixed selling and administrative costs budgeted for the year are $876,000.

If 2,000 units of D1 and 3,000 units of D2 were sold in June, Year 5, at an average selling price of $60 and $80, respectively, and there were no flexible budget cost variances, which of the following statements is true?

1.Actual income is $32,000 higher than budgeted because of a favourable sales volume variance for

2.Actual income is $35,000 higher than budgeted because of a higher sales proportion of a higher-margin

3.Actual income is $32,000 higher than budgeted because of a higher sales proportion of the higher-margin

4.Actual income is $35,000 higher than budgeted because of a favourable sales volume variance