Allan Ltd the producer of a single product has provided the following data to you. His management accountant has prepared the following cost structure based on the normal or budgeted level of output 60,000 liters.

Cost Per Unit UGX.

Material Cost 8 Direct labour 6 Variable overheads 10 Selling and distribution cost per unit 4 Fixed manufacturing overheads 8 Total 36

At the beginning of the 1st quarter, Allan had opening stock amounting to 20,000 liters whose value is based on the above cost structure.

The budgeted selling and administration overheads amount to UGX. 200,000 Per quarter. The company sells the products at UGX. 50 per unit.

The production and sells for each quarter were:

Particulars. QR1 QR2 QR3 QR4

Production (Units) 45,000 60,000 40,000 70,000

Sales (Units) 50,000 55,000 60,000 70,000

Required:

a) Produce in a columnar form profit statement based on absorption and marginal costing technique principles.

b) Reconcile the profits obtained under the two techniques.

c) Compare profits or loses provided in the income statements prepared and give possible reasons for variances.