i need an answer to this question. it's a Managerial accounting question. The topic is standard costing

QUESTION 1 (40 MARKS) Bladjang (Pty) Ltd are in the food and beverage industry and manufacture a branded chutney which is fastly becoming a household name in South Africa as well as under expatriates in foreign countries. History Mrs. Asma Sarkhot grew up with Malay Cape cooking recipes which were handed down by the Malay slaves that eventually settled down in the Cape. Cape Malay food is essentially a rich potpourri of tastes from kitchens of East and West and has been influenced largely by Indonesian, Indian, Arabian, Turkish, Dutch and English cuisine. The huge success of the ever popular Mrs Ball's chutney worldwide prompted Mrs. Sarkhot to investigate the manufacturing and selling of her grandmothers favourite Mango chutney. Market strategy Mrs. Sarkhot did some research and on a small scale (with her mother from their own kitchen) they made the chutney and sold it on fresh farmers markets and flea markets throughout the Western Cape. It immediately took off. That prompted the forming of the company Bladjang (Pty) Ltd. With target costing principles in mind the company followed a market penetration policy, which paid off. The biggest draw card apparently was the branded etiquette bottle not so much the chutney itself. Production strategy The company realised that they currently haven't got the resources to manufacture the chutney themselves. Research showed that a lot of commercially available fruit and vegetable mix from different bulk suppliers will do the job and it would be worth their while to outsource this. To differentiate the taste a pinch of cumin, mustard and turmeric paste are added to each bottle. Bottles can be sourced from a bottling plant in the Sacks Circle on a justintime basis. A cooking process reduces the fruit and vegetable mix by +/-89% in weight. Currently the production is labour intensive. Most of the bottling and labelling is done by hand. The reason being the high cost of machinery. Current situation Three years after incorporation the following are applicable: The company uses a standard absorption costing system for cost control. - Standards are set at the beginning of a year for an average month which are then compared to actual performance on a monthly basis. Budget for an average month prepared at the beginning of 2019 R Sales 10 000 bottles 600 000 Cost of sales 350 000 Fruit mix (raw material) 90 000kg 135 000 Direct labour 105 000 Variable manufacturing O/H (paste/labels etc) 60 000 Fixed manufacturing overhead 50 000 Manufacturing profit 250 000 Less: marketing, selling & admin cost 100 000 Profit 150 000 - The budget was prepared with the following as basis: 0 Direct labour cost is based on 7500 hours. 0 Variable manufacturing overhead is based on units produced. 0 70% of the marketing, selling and admin cost are xed. The variable cost portion (sales commission) varies with units sold. - Actual results for May 2019 show the following 0 Sales 9 000 bottles O/stock C/Stock 0 Inventory: Fruit mix 15 000 kg 7 500kg Finish product 1 000 bottles 3 000 bottles 0 Production cost: R Raw material 121 000 Direct labour 145 000 Variable overhead 75 000 Total variable cost 341 000 Fixed manufacturing O/H 47 500 0 Marketing, selling & admin 150 000 0 Actual chutney purchases were made at a price equal to 10% above the budget cost per kilogram. 0 Direct labour was paid for 9 000 hours. 0 Inventory is valued at standard. 0 The actual selling price per bottle chutney amounts to R62. REQUIRED: You as management accountant is trying to persuade Mrs. Sarkhot to move to a standard variable costing system due to the swings in demand in certain quiet months while production throughput is kept static from month to month. Write a report to Mr. Sarkhot covering the following: a) (i) Prepare two actual income statements for May 2019, one using standard absorption costing and the other using standard variable costing. (12) 4 b) (ii) Reconcile and explain the difference in the two income statements. (2) (iii) Advise which system Bladjang (Ltd) should adopt. (2) Explain the concepts: (i) Target costing. (1 ) (ii) Market penetration. (1) (iii) Justintime. (1) Prepare a statement reconciling the budget profit for an average month to the actual profit for May 2014. As determined in (a) above using a standard absorption costing system. Show all sales and expenditure variance. (21) Bonus marks will be awarded for communication skills, cross references and presentation