Production director has asked Ms. Amal whether the costing systems used above are fit for the Company. He wants to know which method gives a higher profit as per the above calculation even though the Revenues are the same. He is also asking why company is using absorption costing as he has heard it has many weaknesses.

Question 4 4 Marks

Evaluate the reasons for the difference between the marginal and absorption profits shown in the above statements.

Question 5 5 Marks

Explain the benefits of using absorption costing method to our business.

answer question 5 and 6 with 700 words