QUESTION 3 MARGINAL COSTING 20 MARKS Thendo Limited, which manufactures a single product, is considering whether to use marginal or absorption costing to report its budgeted profit in its management accounts. The following information is available: R/unit 4 Direct materials Direct labour 15 19 Selling price 50 Fixed production overheads are budgeted to be R300, 000 per month and are absorbed on an activity level of 100,000 units per month. For the month in question, sales are expected to be 100,000 units although production units will be 120,000 units. Fixed selling costs of R150,000 per month will need to be included in the budget as will the variable selling costs of R2 per unit. There are no opening stocks, Required: (a) Prepare the budgeted profit and loss account for a month for Thendo Limited using absorption costing, Clearly show the valuation of any stock figures. (8 marks) (b) Prepare the budgeted profit and loss account for a month for Thendo Limited using marginal costing, Clearly show the valuation of any stock figures. (8 marks) (c) Which of the two costing principles (absorption or marginal) is more relevant for short-run decision- making, and why? (4 marks)