Intermediate: Preparation of variable and absorption costing profit statements The data below relate to a company which makes and sells one product.

You are required to:

(a) present comparative profit statements for each month using (i) absorption costing, (ii) marginal costing;

(b) comment on the following statement using, for purposes of illustration, if you wish, figures contained in your answer to (a):
'Marginal costing rewards sales whereas absorption costing rewards production.'

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March April (units) (units) Sales 4000 6000 Production 8000 2000 () Selling price per unit 80 Variable production costs, per unit 40 40 () 80 40 Fixed production overhead incurred Fixed production overhead cost, per unit, being the 96000 96000 predetermined overhead absorption rate 12 12 Selling, distribution and administration costs (all fixed) 40000 40000