QUESTION ONE The following information relates to the only product manufactured and sold by Namwela limited K per Unit 50 14 16 Selling price Direct Material cost Direct labour cost Variable production overhead Fixed production overhead Variable sales and marketing overhead 10 1.80 1.00 The following level of activity took place over the first two years of the product's life: Year 1 Year 2 Sales (units) 13,000 12,500 production (units) 14,000 11,500 ADDITIONAL INFORMATION 1. Budgeted fixed production in units for both Year 1 and Year 2 was 12,000 2. Actual fixed production overhead was K22,000 in both year 1 and year 2 3. Actual fixed sales and marketing overhead was K10,000 in both periods. 4. There is no opening inventory in year 1 and all variable costs were as per budget for the two years. Required 1. On the assumption that Narwela used an absorption costing system calculate the under/over absorption 2. Prepare profit statements for each year using each of the following bases: (a) Absorption costing (b) Marginal costing 3. Reconcile the difference in the reported profit under the two (2) bases for each year