Mr. John is the CEO of John Ltd. He is quite unhappy as he figured that the profits for the last three years were declining despite increasing sales. He approached you to seek advice on the cost accounting numbers and income statement prepared by his accountant. He supplies you the following information: Particulars 2017 2018 2019 Sales (at $20 per unit) $1,000,000 1,100,000 $1,200,000 Less: Cost of goods sold 50,000 200,000 250,000 Opening stock Add: Cost of production Variable 260,000 240,000 160,000 Fixed (allocated) 390,000 360,000 240,000 Less: Closing stock 200,000 250,000 50,000 Cost of goods sold (before adjusting for 500,000 550,000 600,000 production volume variance) Adjustment for production volume variance (30,000) 0 120,000 Actual Cost of goods sold (after adjustment for 470,000 550,000 720,000 production volume variance) Gross profit 530,000 550,000 480,000 Less: Selling expenses (semi-variable) 490,000 530,000 570,000 Operating profit / (loss) 40,000 20,000 (90,000) Actual production for the last three years was as follows. (2017: 65,000 units), (2018: 60,000 units), and (2019: 40,000 units). The opening stock as of 1st January 2017 was 5,000 units. Fixed manufacturing overheads were allocated to production based on budgeted activity of 60,000 units every year. Actual fixed overheads for each of the three years was $360,000 (per annum). (a) Prepare a marginal costing income statement which would help you understand the performance of John Ltd. (b) Calculate and advise Mr. John of the breakeven point for John Ltd. (c) Prepare a numerical reconciliation of the profit numbers that you calculated in requirement (a) and the profit numbers calculated by John Ltd's accountant. (d) In order to help Mr. John better understand the financial affairs of this business, explain the reasons in two brief points about the differences in profit numbers obtained from your marginal costing calculations and the profit numbers calculated by John Ltd's accountant