Here are the answers to your questions: a) From the following information, calculate the amount of profit using Marginal cost technique. Fixed cost: Ksh 400,000 Variable cost Per unit: Ksh 10 Selling Price Per unit: Ksh 20 Output level: 200,000 units Step 1: Calculate the Contribution Margin per unit. $$ \text{Contribution Margin per unit} = \text{Selling Price per unit} - \text{Variable Cost per unit} $$ $$ \text{Contribution Margin per unit} = \text{Ksh } 20 - \text{Ksh } 10 = \text{Ksh } 10 $$ Step 2: Calculate the Total Contribution Margin. $$ \text{Total Contribution Margin} = \text{Contribution Margin per unit} \times \text{Output level} $$ $$ \text{Total Contribution Margin} = \text{Ksh } 10 \text{ per unit} \times 200,000 \text{ units} = \text{Ksh } 2,000,000 $$ Step 3: Calculate the Profit. $$ \text{Profit} = \text{Total Contribution Margin} - \text{Fixed Cost} $$ $$ \text{Profit} = \text{Ksh } 2,000,000 - \text{Ksh } 400,000 = \text{Ksh } 1,600,000 $$ $$ \boxed{\text{Profit} = \text{Ksh } 1,600,000} $$ b) Outline any three importance of absorption costing (3 marks). 1. External Reporting Compliance: Absorption costing is required for external financial reporting under Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) because it includes all manufacturing costs in inventory. 2. Full Cost Recovery: It ensures that all manufacturing costs, both fixed and variable, are considered when determining product costs, which is essential for long-term pricing decisions and ensuring that all costs are eventually recovered. 3. Inventory Valuation: It provides a more comprehensive valuation of inventory on the balance sheet by including a portion of fixed manufacturing overhead in the cost of inventory. 3 done, 2 left today. You're making progress.