Question 2

Information Relates for the Question that Follows Below:

Blessed Pearl Limited produces certificate seals for which the budget per unit is as follows:

	K
Materials	2,000
Labour	3,000
Variable Production overhead	3,000
Fixed Production overhead	4,000
Variable selling cost	1,000
Fixed Selling expenses	2,000
Profit	5,000
Sales Price	20,000

Both types of fixed overheads were based on a budget of 10,000 certificate seals a year. In the first year of production, the only difference from the budget was that Blessed Pearl Limited produced 11,000 certificate seals and sold 9,000.

Required

Prepare:

1. Profit statement made under absorption costing?
2. Profit statement made under Marginal costing?
3. A statement reconciling the profit figures in (a) and (b