Question # 9 Flexible budget for a product as prepare by Anchor Ltd, is given below: Sales - unit Sales Manufacturing cost: Variable Fixed Total manufacturing cost Marketing and other expenses: Variable 10,000 Rs. 800,000 300,000 200,000 500,000 200,000 Fixed 160,000 Total Marketing and other expense 360,000 Operating income / (loss) (60,000) 15,000 Rs. 1,200,000 450,000 200,000 650,000 300,000 160,000 460,000 90,000 20,000 Rs. 1,600,000 600,000 200,000 800,000 400,000 160,000 560,000 240,000 Additional information: The budget of 20,000 units will be used for allocating the fixed manufacturing cost to units of product. At the end of first six months, 12,000 units have been completed and 6,000 units have been sold @ Rs.80 per unit. All fixed costs are budgeted and incurred uniformly throughout the year and all costs incurred, coincide with budget. The over or under applied fixed manufacturing cost is deferred unit the end of the year. Required: (a) Calculate the amount of fixed manufacturing cost applied to production during the first six months under absorption costing. Prepare income statements for the first six months under: (i) (ii) (b) Reconcile the difference in operating income under absorption costing and marginal costing. Absorption Costing Marginal Costing