Question 5(15 marks) Leisure Furniture (LF) Ltd makes wooden garden tables and chairs that are sold in sets (one table and four chairs) and its sales are very seasonal. LF's production manager is trying to prepare budgets for next year. For this purpose, she divides the year into two six-monthly periods1 to allow for holidays and seasonal sales. The production cost of a set (the company's only product) is as follows, based on a budgeted production level of 5,{} sets per armurn. $ Variable materials 4.{} Variable labour (5 hours) d Variable overheads 8.00 Fixed overheads Bil In addition to the production costs, sales conunission of 18:96 of selling price is paid on each set sold. The selling price is $25G. Fixed selling and distribution costs amount to $4,{}{},{}{} per annum. Sales and production gures are budgeted as follows. October to March April to September Sets sold [1 Sjl Sets produced 3, Z There will be no opening inventory in October. Fixed costs are incuned evenly throughout the year. Instructions: (a) Prepare income statements, clearly showing inventory values for each six monthly period using (11') marks) (i) variable costing (ii) absorption costing. (b) Prepare a statement which reconciles the income for each six-monthly period calculated in (a). (3 marks) (c) Discuss the advantages and disadvantages of variable and absorption costing and recommend which of these should be used given LF's circumstances