Question 2 SAS Corporation manufactures and sells a single product which known as takraw ball. The absorption costing income statements for the SAS Corporation for 2016 and 2017 are shown below: SAS Corporation Income Statement - Absorption Costing for the years ending December 31, 2016 2017 RM RM Sales 120.000 120,000 Less: Cost of goods sold 66,000 63,000 Gross margin 54.000 57.000 Less: Marketing and administrative costs 51,600 51.600 Net Income 2.400 5,400 Sales and production data are as follows: Units sold Unit produced 2016 3.000 3,000 2017 3,000 4.000 Fixed manufacturing overhead is allocated to production on the number of units produced. Fixed manufacturing cost is RM12,000 yearly. Marketing and administrative costs: Variable marketing costs Fixed marketing costs Fixed administrative costs 8% of sales RM10,800 RM31,200 Variable manufacturing cost per unit: Direct materials Direct labour Variable manufacturing overhead RM6 RM9 RM3 Required: (a) Determine the cost of producing a single unit of takraw ball under absorption costing and variable costing for both 2016 and 2017. (6 marks) (b) Prepare variable costing income statements for the SAS Corporation for both 2016 and 2017. (6 marks) (c) Reconcile the operating income for 2017. (3 marks) (d) Explain in DETAILS why operating income under absorption costing for 2017 is higher than the operating income for 2016 although the number of units sold in each year is the same. (5 marks) (e) In your opinion, between the two methods, which one is mostly applied for short-term managerial decisions? Explain your choice with ONE example of a real company (i.e. AirAsia). (5 marks) [Total : 25 marks