Rock Crusher Ltd produces two grades of sand (A100 and A300) used in the manufacture of industrial abrasives.The results of operations last year were as follows:

Manufacturing (tonnes)

A100 4,000

A300 6,000

Total 10,000

Sales (tonnes)

A100 3,000

A300 4,000

Total 7,000

Revenue

A100 $90,000

A300 $150,000

Total $240,000

Variable manufacturing costs

A100 $20,000

A300 $15,000

Total $35,000

Variable selling costs

A100 $15,000

A300 $20,000

Total $35,000

Fixed manufacturing costs were $100,000 and fixed selling and administrative costs were $60,000. The company held no beginning inventories.

Required

(a)If Rock Crusher uses a variable costing system, what was the operating income?

(b)If Rock Crusher uses absorption costing and allocates actual fixed manufacturing costs to inventory on the basis of actual tonnes produced, what was the operating income?

(c)Reconcile and explain the difference between your answers to parts (a) and (b).