Source: adapted from Chartered Institute of Management

$.$Accountants, P$1$ Management Accounting, Performance

Evaluation.E$5\mathrm{.}6$ Marginal and absorption costing $[$LO$2]$

MZ produces and sells two types of motorcycle: $x$ and $Y.$ The company operates an absorption

costing system. The management accountant has prepared a budgeted profit statement for the year

ended $31$ December $201x.$ This and other relevanti information is given below:

Profit statement for the year ended $31$ December $201$X

The production costs were calculated using the following data:

Production costs consist of direct materials, direct labour and fixed overhead, Fixed overhead

is budgeted at $70,000,000$ and is absorbed using a machine hour rate. Motorcycle X takes $200$

machine hours to produce, with Y needing $300$ machine hours.

a$)$ redraft the budgeted profit statement using a marginal $($variable$)$

costing format.

b$)$

Reconcile the budgeted profit per the absorption costimkknmmkk profit startement and the marginal costing profit computed in part a

$.$