Question 3 Russell Limited manufactures patio heaters, with typical production of 36,000 heaters per month. Projected sales for the next quarter are as follows: Month Jun-17 Jul-17 Aug-17 Sales volume (units) 45,000 31,500 21,000 The budgeted costs of producing patio heaters are: Material costs 22.50 per unit Production operatives 180 per batch of 20 units produced Fixed factory rental 35,000 per week (four week month) Production machinery: Fixed lease cost 112,000 per month Variable cost 15 per unit produced Utility costs consist of both a variable and fixed component and the total utility costs incurred by Russell Ltd in recent months were as follows: Utility Month No units produced Feb-17 141,000 33,000 Mar-17 168,000 37,500 126,000 27,000 May-17 150,000 34,500 The patio heaters are sold for 100 each. On 1 June 2017, Russell Ltd will have an opening inventory of 6,000 heaters and plans to produce sufficient heaters in June to have 33,500 in stock at the end of the month. There will be no production in July 2017 Requirement: costs Apr-17 () Prepare a budgeted profit statement for the month of June 2017 using: (1) Absorption costing 10 marks (11) Variable (marginal) costing, (d) Reconcile the budgeted profits calculated in c (i) and (ii) above and explain why the differences occurs 4 marks Total 20 marks