The data below relate to a company which 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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Sales Production Selling price per unit Variable production costs, per unit Fixed production overhead incurred Fixed production overhead cost, per unit, being the predetermined overhead absorption rate Selling, distribution and administration costs (all fixed) March April units units 4,000 6,000 8,000 2,000 3 80 80 40 40 96,000 96,000 12 12 40,000 40,000