QUESTION $2$

Mulenga Chisha $($MC$)$ produces crocodile sausages and the budgeted profit per unit is as

follows:

K

Materials $1\mathrm{.}00$

Labour $1\mathrm{.}50$

Variable Production overhead $1\mathrm{.}50$

Fixed Production overhead $2\mathrm{.}00$

Variable Selling Cost $0\mathrm{.}50$

Fixed Selling Cost $1\mathrm{.}00$

Profit $2\mathrm{.}50$

Selling price $10\mathrm{.}00$

MC has budgeted $9,500$ units of crocodile sausage in a year. In the first year of

production, the only difference from the budget was that MC produced $10,500$ units of

crocodile sausages and sold $8,500$ units.

Required:

Prepare

a$)$ Profit statement under absorption costing. $(10$ marks$)$

b$)$ Profit statement under marginal costing. $(10$ marks$)$