Problem 99 Gladstown Manufacturing has added two new products to its range. Its accountant has produced the following summarised financial statement showing the profit earned on these products for the first year using absorption costing Beta Delta Materials 25,000 7,500 30,000 60,000 120.000 60.000 205,000 97,500 Direct labour Production overheads Cost of sales Sales Gross profit Other overheads Net profit/loss) 105.500 8,000 250.000 45,000 20.500 24.500 9.700 1.700 Units Units 7,500 Sales 25,000 Closing stock of finished goods 2,000 1,250 There is concern that Delta is showing a loss and it has been suggested that the use of marginal (variable) costing would give a fairer picture of the financial results, Further analysis shows that one-third of the production overhead charged to each product varies according to the level of production whereas two-thirds of the charge is product-related and is fixed. 75% of the other overheads are company overheads that have been allocated to the products and 25% vary with the level of sales of each product. Required: (a) Redraft the absorption costing statement in more detail showing such matters as the cost of goods produced, stocks, fixed overheads and variable overheads, (b) Prepare a statement showing the contribution and net profit of each product using marginal (variable) costing (c) Explain why the net profit figures are different under the two methods