Tutorial 5 absorption and marginal costing Question 1 Dreamland Sdn. Bhd. (DSB) manufactures and sells only one product. The management accountant has prepared the following budgeted profit statement for the month of July 2021 using the absorption costing method: RM RM Sales (21,000 units) 462,000 Less: Cost of sales Opening stock (5,000 units) 51,950 Production (24,000 units) 249,360 Less: Closing stock (8,000 units) 83,120 (218,190) Over-absorbed overheads (2,040) Gross profit 241,770 Less: Non-production costs Variable selling and distribution overheads (23,100) Net profit 218,670Additional information: (1) The budgeted and actual fixed production overheads for the month of July 2021 was RM51,000 and absorbed based on the normal level of monthly production of 25,000 units. Required: (a) Calculate the following: (i) The variable production costs per unit; (ii) The total monthly fixed production costs. (4 marks) (b) Prepare the budgeted income statement for July 2021 using the marginal costing method. (10 marks) (c) Prepare a statement to reconcile the net profit calculated in part (b) above with the net profit in the budgeted income statement prepared using the absorption costing method. (2 marks) (d) Based on the calculation in part (b) above, explain why the net profit for one of the methods is higher. (4 marks) [Total: 20 marks]