Modem Metal Works details in German Silver Sets; the standard production cost of which is as under:

Rs.

Direct material4kg @ Rs.35140

Direct labour3 Hrs @ Rs.3090

F.O.H- Variable15

Fixed100

Total cost345

Normal output is 16,000 units per annum, costs relating to selling, distribution and administration are:

Variable

20% of sales value

Fixed

Rs.900,000 per annum

The only variance is fixed (production) OH volume variance.

There are no sets in finished goods stock as on 1^st April 2002. The fixed overheads expenditure is spread throughout the year. The selling price per set is Rs.700. The numbers of sets to be produced and sold are budgeted are:

Six month endingSix month ending

30^th September 2002 31^st March 2003

Production8,5007,000

Sales7,0008,000

Required:

(i)Prepare statements showing sales, costs of sales and profit for each six month period, using:

Marginal costing

Absorption costing

(ii)an explanatory statement reconciling each six months period profit using marginal costing with that of absorption costing.