Anggun Seri Sdn Bhd makes blouses which will be distributed throughout Malaysia. The budgeted productions and sales for 2019 are 120,000 blouses. The blouses will be sold at RM 8.00 per unit.

The details of the standard cost per unit are as follows:

RM

Direct materials (RM 5 per meter) 20

Direct labour (RM 10 per hour) 10

Variable production overhead 10

Fixed production overhead 20

TOTAL PRODUCTION COST 60

Variable selling expenses is RM 0.50 per unit, while fixed selling expenses is RM 15,000 per quarter. Productions and sales for the first quarter of 2019 are as follows:

January February March

Productions (units) 10,000 8000 11000

Sales (units) 8000 9000 12000

It is assumed that actual fixed production overhead and fixed selling expenses are the same as budgeted.

Required:

a) Prepare the operating income statements for the months of February and March 2019 by using Marginal Costing Approach and Absorption Costing Approach

b) Reconcile any difference between the net profit figures using the two costing approaches above. Give two reasons for the difference in profit