PAM3023: Management Accounting QUESTION 3 (20 MARKS) The Beauty Empires produces a special type of moisturizing lotion: baby lotion that is widely used by paediatrician to soothe and moisturize baby skin at the hospital nursery room. To meet the increasing demand of the baby lotion, the company set-up a smart factory that integrates Industry 4.0 systems into its production lines on 1 January 2021. The following was the information relating to the year ended 31 December 2021, when sales and production levels were 250,000 litres. The Beauty Empires estimates that there will be no cost changes over the next 2 years. The normal level of activity is 250,000 litres per annum. Sales (in litres) Production costs: Direct materials RM RM 2,400,000.00 480,000.00 Direct labour 600,000.00 Variable overheads 96,000.00 Fixed production overhead 480,000.00 1,656,000.00 Net profit 744,000.00 There was no opening stock at the beginning of 2022. The following is the projected figures for the next 2 years: Sales (in litres) Production (in litres) 2022 2023 220,000 260,000 280,000 230,000 REQUIRED: a. Prepare a profit statement for Year 2022 and 2023 using the following bases: i. Absorption costing ii. Marginal costing [12 Marks] b. Explain why the net profit figures are different under absorption and marginal costing. Support your answer with a profit reconciliation statement. [8 Marks]