Question 1 KC Ltd manufactures and sells a single product. Cost data for the product are given below Variable cost per unit Direct Materials Direct labour $6 $11 Variable manufacturing overhead $5 Variable selling and administrative $3 Fixed costs per month Fixed manufacturing overhead Fixed selling and administrative $315,000 245,000 The product sells for $60 per unit. The number of units produced and sold in January is 17,500 and 15,000 respectively. In February, the number of units produced is unchanged but the number of units sold is 20,000. The company prepared the following absorption costing income statement for January and February as below: Sales January $900,000 Cost of goods sold 600,000 Gross margin 300,000 Selling and admin 290,000 Net operating income 10,000 February $1,200,000 800,000 400,000 305,000 95,000 Required: (a) Prepare the variable costing income statement for January and February. (9 marks) (b) Explain the difference between variable costing and absorption costing income statement for January and February. (3 marks) (Total: 12 marks)