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