Dabwiso Limited uses a standard costing system. The standard cost per unit of

Product D is as follows:

Direct material $....................................\mathrm{.}2500$

Direct labour $.....................................\mathrm{.}1200$

Production overheads: Variable $.......................\mathrm{.}600$

Fixed $.............................................\mathrm{.}500$

Standard production cost $..........................\mathrm{.}4800$

Standard selling price $.............................\mathrm{.}7500$

The standard fixed production overhead absorption rate was based on a budgeted

activity of $10,000$ units. During Period $4,$ Production was $10,000$ units as planned but sales were only $8,000$ units. There was a total fixed production overhead variance of K$500000$ adverse. All units were sold at K$7,500$ each. There were no opening inventory at the beginning of the period. Other costs incurred during the period were in relation to selling and distribution, and administration. These were as follows:

Variable Selling and distribution $20\%$ of sales, while fixed selling and distribution was K$3000000$

Variable Administration was K$0$ and Fixed Administration was K$5000000$

Required:

$($a$)$ Prepare operating Profit statement for Period $4$ using:

$($i$)$ Absorption costing

$($ii$)$ Marginal

$($b$)$ Prepare a reconciliation of the difference between the Profit$/$Loss under absorption costing and under marginal costing and explain the reason for the difference.