Manus Factorum is a slow fashion industry that produces and sells a single product, a naturally dyed, handwoven and organic cotton Midi Dress. Selected cost and operating data relating to the product for two years are given below:

a) Compute the unit product cost under:

i. Variable costing

ii. Absorption costing

b) Prepare the income statements for Year 1 and Year 2 under:

i. Variable costing

ii. Absorption costing

c) Reconcile the variable costing and absorption costing profit figures.

d) Explain any differences between the income statements under (a) and (b) for Year 1 and Year 2

\begin{tabular}{|llr|} \hline \multicolumn{2}{|l|}{ Selling price per unit } & 300 \\ Manufacturing costs: & & \\ Variable per unit produced: & Direct materials & 90 \\ & Direct labour & 50 \\ & Variable overhead & 25 \\ Fixed per year & & 15,000 \\ Selling and administrative costs: & 15 \\ Variable per unit sold & & \\ Fixed per year & & 13000 \\ \hline \end{tabular}