QUESTION ONE A. Marginal costing and Absorption costing are cost management techniques used to allocate cost to the products produced for their valuation. There are differences in the operating profit when either marginal costing or absorption costing is deployed.

Required:

State TWO (2) reasons that account for the differences in the operating profit under Marginal costing and Absorption costing systems. (5 marks)

B. Adam Ltd is a producer of product Wale. In a period, it produced 20,000 units and sold 18,000 units of product Wale. The selling price per unit of the output is GH5. In the planned production period, relevant cost and revenue data were stated as:

GH

Sales 100,000

Production cost:

Variable 35,000

Fixed 15,000

Administration and selling overheard:

Fixed 25,000

Required: Prepare a profit or loss statement based on the following costing systems:

i) Marginal costing systems. (10 marks)

ii) Absorption costing systems. (10 marks)