BBQ Co$.$ Ltd$.$ is a manufacturer of glass bottles which has been affected by competition from plastic bottles and currently operating below capacity. The data below relate to BBQ Co$.$ Ltd$.$ which makes and sells one product $($glass bottles$)$:

January February March

$($Units$)($Units$)($Units$)$

Sales $5,0007,0004,000$

Production $9,0003,0004,000$

GH$$ GH$$ GH$$

Selling price per Unit $100100100$

Variable production cost per Unit $606060$

Fixed production overhead incurred $120,000120,000$ Fixed production overhead cost per unit,

being the predetermined overhead

absorption rate $1515120,000$

$15$

Selling & Distribution cost $($fixed$)50,00050,00050,000$

Required:

$($a$)$ Prepare comparative profit statements for each month using:

$($i$)$ Absorption costing

$($ii$)$ Marginal costing

$($b$)$ Explain two justifications each for using both variable and absorption costing.