QUESTION 4 (18 MARKS: 32 MINUTES) Ulba Sdn Bhd, which manufactures a watch, is considering whether to use marginal or absorption costing to report its budgeted profit in its management accounts. The following cost information is available for January 2017: RM per unit Direct materials 4 Direct labor 15 Total variable expenses 19 Selling price per unit 50 Fixed production overheads are budgeted to be RM300,000 per month and are absorbed on an activity level of 100,000 units per month. For January 2017, sales are expected to be 100,000 units although production units will be 120,000 units. Fixed selling costs of RM150,000 per month will need to be included in the budget as will the variable selling ocosts of RM2 per unit. There are no beginning inventories. Required: a) Prepare the budgeted income statement for January 2017 for Ulba Sdn Bhd using both the absorption and variable costing. Clearly show the valuation of any inventories fiqures. (14 marks) b) Recondle the profits under these two methods. (2 marks) c) If the units produced and unit sales are equal, which method would you expect to show the higher net operating income, absorption costing or variable costing? Why? (2 marks)