QUESTION 4. Comel Sdn Bhd (CSB) produces and sells a single product, a wooden hand loom for weaving small items such as scarves. Selected cost and operating data related to the product for two years are given below: Selling price per unit RM45 Manufacturing costs: Variable cost per unit produced: Direct materials RM9 Direct labour RM5 Variable overhead RM4 Fixed cost per year RM135,000 Selling and administrative costs: Variable cost per unit sold RM3 Fixed cost per year RM65,000 Year 2018 Year 2019 Units in beginning inventory 0 3,000 Units produced during the year 15,000 9,000 Units sold during the year 12,000 12,000 Units in ending inventory 3,000 0 Additional information: 1. Net operating income is the same for year 2018 and 2019 under variable costing system, which is RM88,000.

REQUIRED:

(a) Calculate unit product cost under absorption costing system for year 2018 and 2019. (5 Marks)

(b) Prepare an income statement using absorption costing system for the year ended 31 December 2018 and 2019. (8 Marks)

(c) Reconcile the variable costing and absorption costing net operating incomes for year 2018 and 2019. (5 Marks)

(d) Explain how managers manipulate income with the use of absorption costing system. (2 Marks)