Question 1 BenTen ("BT") manufactures and sells a single gaming chair at a unit selling price of $400. The company uses variable costing for internal management reports, but its income statements for external reporting are presented based on full absorption costing. The following data refer to the years ended 31 March 201 and 202 : The budgeted production volume used for the purpose of absorption costing is 5,000 units in both years. BT uses the first-in first-out (FIFO) assumption for the calculation of cost of sales. There was no opening stock in 201. Excess stock from 201 is carried forward into 202. Sales increased in 20x2 as a result of higher marketing cost incurred. Due to war in its supply chain region, fixed manufacturing overheads increased by $20,000 and fixed selling and admin cost which increased by 50% in 202 compared with 201. The CEO does not understand why profits only did not increase by contribution margin per unit despite selling more units of gaming chairs in 202. Required: (a) Prepare separate contribution margin format income statements for each of the years. Explain why profits in 202 did not increased by the expected contribution margin per unit. (18 marks) (b) Compute BT's net operating income using absorption costing for each year and reconcile the difference in income figures for each year as compared with your answer in part (a). Explain why BT uses variable costing for internal management instead of full absorption costing. (32 marks)