hcompany manufactures two models of cars, the model A and model B. The company currently uses variable costing. *Fixed manufacturing overheads are allocated using direct labor hours as allocation base. The production of each unit of model A takes 400 labour hours, while each unit of model B takes 250 hours. _l |_ " CAR A CAR 3 Total Revenue 540,000 529,000 1,069,000 Manufacturing variable cost 292,500 195,500 488,000 Marketing variable cost 45,000 23,000 68,000 Contribution margin 202,500 310,500 513,000 Manufacturing fixed costs 80,000 20,000 100,000 Marketing fixed costs 25,000 25,000 50,000 Profit 97,500 265,500 363,00! CAR A CAR 3 Units Value Units Value Opening inventory 550 35,750 500 42,500 Units produced 5,000 325,000 2,000 170,000 Units sold 4,500 292,500 2,300 195,500 Closing inventory 1,050 68,250 200 17,000 | Questions a. Rewrite the company's prot statement in an absorption costing format. Show all workings clearly. b. Compare the prot calculated under variable costing with the prot calculated under absorption costing and explain what causes the difference in prot gures. Show all workings clearly. 0. Discuss merits and limits of absorption costing and variable costing. Illustrate with examples