2 Brandon plc is dedicated to the production and sale of speed scooters. The company’s budgeted production is 3,000 units per month.

Variable manufacturing costs $16 per unit

Variable selling costs $ 4 per unit

Fixed selling costs $24,000 per month

Fixed manufacturing costs $30,000 per month

Each pair of sunglasses sells for $40.The company values stock on a first-in-first out basis.

Other data relating to Sept and Oct 2019 were as follows:

Number of units	Sept	Oct
Opening inventory	400	100
Production	3,400	3,300
Sales	3,700	2,800
Closing inventory	100	600

Question

(a) Prepare income statements using absorption costing, for each of the months Sept and Oct 2019 (8 marks)

(b) Prepare income statements using marginal costing, showing clearly your calculation of contribution, for the months Sept and Oct 2019. (8 marks)

(c) Reconcile to profits calculated on a marginal costing basis with the profits calculated on an absorption costing basis for Sept and Oct 2019. You are required to reconcile the figures with a numerical computation and also to explain the difference in a brief written statement for the directors of the business.