Question 3 [15 marks; 27 minutes] ABC Ltd was established on the 1st of April 2020, to manufacture and sell a unique electronic part. The company's plant is highly automated with low variable and high fixed manufacturing costs. The company accounts for inventory on a first-in, first-out basis (FIFO). The profit before tax for the recent financial year ended 31 March 2022, prepared on the absorption costing basis, is presented below: Sales Cost of sales Opening inventory Total manufacturing costs Less closing inventory Gross Profit Actual 2022 R 517 500 -360 000 400 000 -40 000 157 500 Less total administrative and selling expenses -110 500 Net profit before tax 47 000 Page 4 of 5 Actual information for the 2022 financial year ended 31 March 2022, as well as the forecasted information for the 2023 financial year, is provided below: Actual Forecast Description 2022 2023 Selling price per unit R11,50 R13,30 Sales in units 45 000 50.000 Normal production in units 50 000 50 000 Actual production in units 50 000 60 000 Total variable manufacturing costs per unit R2,00 Total fixed manufacturing costs R300 000 R2,40 R330 000 Variable selling and administration costs per unit R0,90 Total fixed selling and administration costs 70 000 R0,90 70 000 QUESTION 2 REQUIRED You may IGNORE any TAX implications Sub- Total Total 1. Calculate the profit before tax as per variable costing principles of The Hadfield Company for the year ended 31 March 2022. (Hint: You need to prepare a reconciliation from the absorption costing profit to the variable costing profit) 2. Prepare the forecasted income statement of The Hadfield Company for the year ended 31 March 2023 as per variable costing principles. 7 8 Total Marks 15