A Reed Ltd manufactures three products A, B and C. Budgeted costs and selling prices for the three months ending 30 September \(19 \mathrm{X} 2\) are as follows:

Labour costs are \(£ 3\) per hour, and material costs are \(£ 4\) per kilo for all products. The total fixed costs are of a general factory nature, and are unavoidable.
The company has been advised by its supplier that due to a material shortage, its material requirement for the month of September will be reduced by 15 per cent. No other changes are anticipated.
\section*{Required:}
A A statement to show the maximum net profit for the three months ending 30 September \(19 \mathrm{X} 2\), taking into account the material shortage for the month of September.
B Explain how the fixed cost element is dealt with in marginal costing and in absorption costing. Briefly explain how this affects any closing stock valuation.

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A B Sales (units per month) 6,000 8,000 5,000 Selling price per unit Unit costs Direct labour Direct materials" Variable overhead Fixed overhead 45 44 37 6245 9 20 24 16 3 6728 5