K Question 3 The following has been extracted from the financial records of ATF Limited: Annual budgeted capacity of the plant 40,000 units Production during the year 35,000 units Opening finished goods stock 3,000 units Closing finished goods stock 1,500 units Fixed production overheads for the year 1,000,000 Fixed selling overheads for the year K 200,000 Selling price per unit K 200 Direct material cost per unit K 70 Direct labour cost per unit Variable production overheads per unit K 30 Variable selling overheads per unit K5 Required: (a) Prepare profit statements for the year, under absorption costing and marginal costing systems. (16 marks) (b) Explain any difference that may occur in the reported profits under the two systems in (a) above. (4 marks) K 35 (20 Total marks)