Question 2 Ayman International Fixture produces and sells many office fixtures. In order to ensure its sustainability, the company has opened a new plant for the production of digital table this year, 2018. The operation of the plant has started in March. The top management is anxious to see the profitability of the new digital table and thus has asked that a statement of profit and loss to be prepared. The following information relate to March and April 2018: March Beginning inventory (units) Units produced Units sold 10,000 8,000 April 2,000 10,000 9,000 RM 300 60 300,000 Selling price per unit Selling and administrative expenses: Variable per unit Fixed (total) Manufacturing costs: Direct material per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost (total) 100 20 100,000 Required: (a) Assume the company uses absorption costing, i. Determine the unit product cost. ii. Prepare a statement of profit and loss for March and April (6 marks) (b) Assume the company uses variable costing. i. Determine the unit product cost. ii. Prepare a statement of profit and loss for March and April. (6 marks) (c) Explain the reason for any difference in the value of ending inventory balance under the two costing methods and the impact of this difference on reported net operating income. (3 marks) (d) Generally, the top management is not quite happy with the performance in March and April. As a quick action plan to boost the reported profit, the production department has doubled the production in May. However the sales and marketing department was only able to sell 10,000 units. Assume that the cost structure remains the same, prepare the following: i. a statement of profit and loss for May using an absorption costing. ii. a statement of profit and loss for May using a variable costing. (6 marks) (e) Refer to your answer in Requirement (d). Is it a good strategy to increase the production level in order to show good performance? Discuss. (4 marks) [Total: 25 marks)