Exercise 3. Absorption and marginal costing Max Ltd. Is drafting a budget on the basis of following data: In order to build up inventory in anticipation of an increase in demand which is expected later in year, production is to exceed sales in first three months of the year as follows: Required: 1. Prepare two profit statements. Each in comparative columnar form, covering each of three months a. On a marginal costing basis b. On a full absorption costing basis 2. Reconcile the difference in profits for each month