Management Science Midterm Exam

Instructions: Solve the following Problem. Show your solutions in Word Format. (100 points)

Lawson Company had the following manufacturing information for the current year. Assume the
same per unit costs occurred in the prior year.

Units
Beginning Inventory units 200
Sold 475
Actual Production 500
Budgeted Production 500
Ending Inventory units 225
Unit Variable Costs
Manufacturing $ 125.00
Selling and Administrative 75.00
Fixed Costs
Manufacturing 120,000
Selling and Administrative 25,000
Selling price 600.00

Required:
Determine operating income under both full costing and variable costing and explain the
difference.