Rumbles Ltd manufactures a single product, with a variable manufacturing cost of $12 per unit and a selling price of $20 per unit. Fixed production overhead is $90000 per period. The company operates a full absorption costing system, and the fixed overhead is absorbed into the cost of production on the basis of a normal activity of 15600 units per period, at a rate of $6 per unit. Any under or over absorbed overheads are written off to the profit and loss account at the end of each period. It may be assumed that no other expenses are incurred.

Summarised below are the company's manufacturing and trading results (showing quantities only) for periods 2 and 3.

PERIOD 2 3 Units Units Opening stock 5000 11000 Production 17000 13000 22000 24000 Less closing stock 11000 6000 Sales 11000 18000 The managing director of Rumbles Ltd, who has recently returned from a course on marginal costing, has calculated that as sales have increased by 7000 units in period 3, the company's profits should increase by $56000. However, the results produce by the accountant show that profits in period 2 were $34000 and in period 3 $24000. The managing director is somewhat surprised!
REQUIRED

(a) Produce columnar revenue accounts for both periods, showing how the profits of $24000 and $34000 were obtained

(b) Carefully explains, with supporting calculations:
(i) the reasons for the reduction in reported profits between the two periods (ii) how the managing director has calculated that profits should increase by $56000 in period 3 (iii) why profits have not increased by $56000 in period 3