1 [50 MARKS] Intervision is a manufacturing company which produces and sells a single product, 'Street light'. The following is the standard cost per unit of the product: Cost Variable manufacturing Fixed manufacturing Variable selling and administration Fixed selling and administration Rs 22.50 17.50 4.00 15.00 59.00 Fixed manufacturing costs per unit are based on a predetermined rate established at a normal activity level of 18,000 production units per period. Fixed selling and administration costs are absorbed into the cost of sales at 20% of the selling price. Under/over recovery of overheads are transferred to the profit and loss account at the end of each period. The following information has been provided for two consecutive periods. Sales Production Period 1 Period 2 Units Units 17.000 18,000 16,000 18,400 Rs Rs Sales 1,275,000 1,350,000 Page 2 of 9 Variable manufacturing costs 360,000 414,000 Variable selling and administration costs 68,000 72,000 Fixed manufacturing costs 320,000 315,000 Fixed selling and administration costs 270,000 270,000 REQUIRED (a) Prepare an income statement for period 1 and 2 under absorption method. [22 Marks] (b) Prepare an income statements for period 1 and 2 under the marginal costing method. [18 Marks] (c) What are the main causes of difference between marginal and absorption profits. [8 Marks] (d) State the situations in which the profit figures calculated under both absorption costing and marginal costing would be the same. [2 Marks]