P Ltd manufactures a specialist photocopier. Increased competition from a new manufacturer has meant that P Ltd has been operating below full capacity for the last two years.

The budgeted information for the last two years was as follows:

	Year 1	Year 2
Annual sales demand (units)	70	70
Annual production (units)	70	70
Selling price (for each photocopier)	50,000	50,000
Direct costs (for each photocopier)	20,000	20,000
Variable production overheads (for each photocopier)	11,000	12,000
Fixed production overheads	525,000	525,000

Actual results for the last two years were as follows:

	Year 1	Year 2
Annual sales demand (units)	30	60
Annual production (units)	40	60
Selling price (for each photocopier)	50,000	50,000
Direct costs (for each photocopier)	20,000	20,000
Variable production overheads (for each photocopier)	11,000	12,000
Fixed production overheads	500,000	530,000

There was no opening inventory at the beginning of Year 1.

Required:
1.	Prepare the actual profit and loss statements for each of the two years using: (Round your answers to the nearest whole number. Enter all answers as positive values. Leave no cells blank. You must enter a "0" for the answer to grade correctly. Enter all answers in thousands of pounds.)

	(a)	absorption costing
			Year 1		Year 2
			000	000	000	000
		Sales
		Cost of sales:
		Opening inventory
		Total production cost
		Closing inventory
		Under/over absorption adjustment
		Profit

	(b)	marginal costing
			Year 1		Year 2
			000	000	000	000
		Sales
		Cost of sales:
		Opening inventory
		Variable production cost
		Closing inventory
		Fixed cost
		Profit

2.	Calculate the budgeted break-even point in units and the budgeted margin of safety as a percentage of sales for Year 1 and then again for Year 2. (Round your answers for break-even points upward to the nearest whole number, and for margin of safety as a percentage of sales to 2 decimal places.)
	The budgeted break-even point in units for Year 1	units
	The budgeted margin of safety as a percentage of sales for Year 1	%
	The budgeted break-even point in units for Year 2	units
	The budgeted margin of safety as a percentage of sales for Year 2	%

3.	(a)	An increase in variable overheads will lead to a lower breakeven point.

	(b)	The margin of safety represents the difference between the budgeted and the breakeven sales volume.