Your General manager has been cautioned about using absorption costing income statements evaluating profits because this will always report relatively high profit if the manager produces more output than what that manager has been able to sell due to planning errors. Following this advice, he asked the Management Accountant to provide him with information that would assist advice he received to verify the validity of the YEAR 2 180,000 units 153,000 units 160,000 units This is the information received Production budget Production attained Sales attained YEAR 1 146,880 units 161,000 units 153,000 units Shs Shs 1,530,000,00 Shs Shs 1,600,000,00 0 1,120,000,000 64,000,000 1,184,000,000 416,000,000 383,600,000 32,400,000 Revenue 0 variable factory costs 1,071,000,000 Sales commission Total variable costs Contribution margin Fixed costs: 183,600,00 Production 0 120,000,00 Administration 0 Distribution 80,000,000 Total fixed cost operating profit 61,200,000 1,132,200,000 397,800,000 383,600,000 14,200,000 31 183,600,00 0 120,000,00 0 80,000,000 In a frenzy of anger, the General Manager demoted the Management Accountant for failing to provide complete report and he has now assigned you to do this job. Required (a) Identify and explain the missing information that made the General Manager angry? (b)Prepare an alternative statement of income and show how its profits differ from the profit that has is reported in the statement of income that was prepared by Management Accountant (c) Reconcile the income differences and add brief notes that will enable the General Manager to understand that absorption costing distorts the reported income if inventory level change. 32