QUESTION 1 The following information was extracted from the accounting records of Abel Ltd for the months ended 31 July 2013 and 31 August 2013 respectively: Units R Month ended 31 July 2013 Sales for the month 900 21 600,00 Production for the month 1 000 Finished units at the beginning of the month nil Variable production costs per unit 5,40 Variable selling and administration costs per unit 3,00 Fixed production costs 4 600,00 Fixed selling and administration osts 3 100,00 25,00 800 900 Month ended 31 August 2013 Selling price per unit Sales for the month Production for the month Variable production costs per unit Variable selling and administration costs per unit Fixed production costs Fixed selling and administration 6,50 3,00 5 994,00 3 100,00 Additional information: 2. 1. The company uses the first-in-first-out method for the valuation of the stock. The increase in the fixed production cost is due to a new rental agreement in respect of the factory. 3. There were no stock losses during any of the two months. REQUIRED: Prepare the income statement for August 2013 according to: (1) The direct costing method (i) The absorption costing method The format of the two income statements must clearly illustrate the difference between the two methods. (b) Reconcile the difference in profits according to the two methods