E7.30 LO 7.11 (appendix) Variable and absorption costing: manufacturer Alison Ltd began operations on 1 January and achieved the following results for the year: Sales Selling price 36000 units $67.50 per unit Manufacturing costs: Direct material Direct labour Variable overhead Fixed manufacturing overhead Selling and administrative costs: Variable Fixed Production $18 per unit $9 per unit $13.50 per unit $450000 $4.50 per unit sold $45000 37500 units Required 1. Prepare an absorption costing income statement for Porter Ltd. 2. Prepare a variable costing contribution margin statement for Porter Ltd. 3. Reconcile the differences between the profits under the two statements by:

(a) identifying the areas where the statements differ

(b) using the short-cut method.