QUESTION TWO Computer Limited was formed three years ago to produce a single product, the Mini: The directors are receiving the financial results of the first three years presented by the company accountant, and are concerned with the decline in profits in the year 20x2 Summarised results are shown below: 20x0 20x1 20x2 Production: Budget (units) 1,000 1,000 1,000 Actual (units 900 1.100 800 800 800 1,000 K80 K80 K80 Sales (units) Selling price Marginal production cost per unit Fixed production overheads K10 K10 K10 K40,000 K40,000 K40,000 Fixed selling and administrative overheads K20,000 K20,000 K20,000 Net profit nil K8,000 K2,000 Fixed overheads are absorbed on the basis of budgeted annual production. Under - or over absorbed overheads are charged to cost of goodssold. REQUIRED: Prepare a statement showing the profir figures derived by the company accountant Prepare an income statement using marginal costing approach. Reconcile the profits calculated in parts (a) and (b) above Explain the rationale behind the approaches adopted in parts (a) and (b)