Charlene Ltd manufactures and sells laptops and uses standard costing. For the month of September there was no beginning inventory, there were 3,000 units produced and 2,500 units sold. The manufacturing variable cost per unit is $385 and the variable operating cost per unit was $312.50. The actual and fixed manufacturing cost is $450,000 and the fixed operating cost is $75,000. The selling price per unit is $925. The budgeted units to be produced are 2,750. There are no price, efficiency, or spending variances. Any production- volume variance is written off to cost of goods sold in the month in which it occurs. When calculating the budgeted overhead rate for fixed costs round to the nearest cent.

Reconcile the difference in operating income calculated using variable costing and absorption costing. Then explain why there is a difference in the operating profit under the two methods.