You have gone through the activities for the last year, 2022, and found that AMT rents a small administrative office in Seaford for $24,000 per year in addition to the manufacturing plant which costs $60,000 per year. William agreed to pay the annual salary of $50,000 to you as an accountant but you need to handle some administrative work as well. In addition to you, there is a sales manager who is paid an annual fixed salary of $30,000 plus a commission of $50 for each outboard motor sold. The miscellaneous cost incurred in the administrative office was $5,000 per year and this cost is expected to remain the same amount for years to come. In the manufacturing plant, there is a full-time supervisor who gets paid $75,000 per year for supervising the production and the casual staff. The machine maintenance cost is $10,000 per year and another factory- related miscellaneous cost is $5,000 per year. These costs are expected to remain the same amount for yea rs to come. AMT has a contract with a delivery firm for delivering motors to their outdoor adventure retailers. The delivery is arranged only once a month to all the retailers. The delivery information and costs for the last 6 months are as follows: Table 1: Delivery cost and units Month Motors delivered Delivery costs December 50 $2200 November 60 $2750 October 20 $1200 September 40 $1800 August 25 $1350 July 10 $750 June 45 $1950 In the last year (2022), AMT has manufactured 500 outboard motors, and the material costs incurred in the last year are given in Table 2. There was no opening inventory, work-in-process inventory, or finished goods but there were 50 motors (finished goods) remaining at the end of the last year. Table 2: Material quantity and cost Materials Quantity Total cost Aluminium alloy $2000 Cylinder head & block $25,000 Motor engine $62,000 Bottom cowling 500 $12,500 Lower unit and propellor 500 $17,500 Copper cable 2000 meters $500 Electric unit and harness $25,000 Nut and bolt 5,000 units $1,000 Casual staff handling all manufacturing processes. In the first phase, machine operators are manufacturing certain parts and it takes 1 hour to manufacture parts per motor. Machine operators are paid $40 per hour. In the assembling section, staff assembled the powerhead, midsection, and lower unit. This task is very labour intensive, and it takes 2 hours per motor, and staff is paid $30 per hour. Once the assembling is done, then pass to the electrical team to do wiring and testing. It takes 0.5 hours per motor and electricians are paid $50 npr hnnr Question 4. In a recent meeting, William and Oliver said that "we have to make a certain decision based on our last year's operating profit\". However, you informed them that \"we can produce operating profit using two different methods: absorption costing which is required by the regulations and variable costing which can be used in our internal decision making, and profit may be different. 50, we have to be very careful when we make decisions". However, Oliver and William questioned how profit can be different for the same period. The motors are sold for $1200 each. Required: a). Prepare the income statement for the last year using the variable costing method and absorption costing method (The normal level of production is 500 motors which is used in allocating fixed production). (Exhibit 7.3, chapter 7, 10 marks) b) Discuss what would be the reason to have two different profits and the possible undesirable effect of this. Use profit reconciliation to support your arguments. (Chapter 7, 5 marks)