Duke Ltd makes and sells two products. A and B. The following information is available for period 3:

A B

Production (units 2,500 1,750

Sales (units) 2,300 1,600

Opening inventory (units) 0 0

Financial data:

A B

Unit selling price 90 75

Unit cost:

Direct materials 15 12

Direct labour 18 12

Variable production overheads 12 8

Fixed production overheads 30 20

Variable selling overheads 1 1

Fixed production overheads for the period were 105,000 and fixed administration overheads were 27,000.

Required:

1. Prepare a profit statement for period 3 based on marginal costing principles.
2. Prepare a profit statement for period 3 based on Absorption costing principles.

Reconcile the profits reported under the different methods.