The Chief Executive of PS Ltd, is puzzled by the income statements of the two most recent months–April and May, because sales increased in May and yet profits declined. He asks you to explain the...

The Chief Executive of PS Ltd, is puzzled by the income statements of the two most recent months–April and May, because sales increased in May and yet profits declined. He asks you to explain the results: Income Statement

The standard fixed cost per unit is `8, based on normal production capacity of 12,000 units per month.

You are required to

1. Determine production in each month.

2. Explain the results to the chief executive.

3. Prepare income statements based on variable costing.