QUESTION ONE The following information relates to the only product manufactured and sold by Namwela limited. K per Unit Selling price 50 Direct Material cost 14 Direct labour cost 16 Variable production overhead 10 Fixed production overhead 1.80 Variable sales and marketing overhead 1.00 The following level of activity took place over the first two years of the products life: Sales ( units) production ( units) Year 1 13,000 14,000 Year 2 12,500 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 Namwela 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.QUESTION ONE The following information relates to the only product manufactured and sold by Namwela limited. K per Unit Selling price 50 Direct Material cost 14 Direct labour cost 16 Variable production overhead 10 Fixed production overhead 1.80 Variable sales and marketing overhead 1.00 The following level of activity took place over the first two years of the products life: Sales ( units) production ( units) Year 1 13,000 14,000 Year 2 12,500 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 Namwela 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.v