QUESTION TWO New Ventures Ltd of Mombasa have organized a new division to manufacture specially coded cellular telephones. The division monthly costs are shown below Manufacturing costs Variable costs per units Direct materials Variables manufacturing overhead Fixed manufacturing overhead costs (total) Kshs.48 Kshs.2 Kshs.360,000 12% of sales Kshs.470,000 Selling and administration costs: Variable Fixed (total) News ventures Ltd regards all of its workers as full time employees and the company company includes its labour costs in its fixed manufacturing overhead. The cellular phones long-standing no lay off policy. Furthermore, production is highly automated. Accordingly for Kshs. 150 each. During September, the first month of operations, the following activity recorded: Unit produced Units sold 12.000 10,000 Required: 1. Compute the unit product cost under: a) Absorption costing b) Variable costing. 2. Prepare an absorption costing income statement for September. (3 marks (8 marks 3. Prepare a contribution format income statement for September using varius 4. operations. As a member of top management would you prefer to rely on costing. (9 marks Assume that the company must obtain additional financing in order to continut statement in (2) above or in (3) above when meeting with a group of prospero investors? Reconcile the absorption costing and variables costing net operating incomes (2 marks (2) and (3) above. (3 marks [Total: 25 mark) 5