Aqualead Ltd produces orange juice at its factory. The following information relates to the production of orange juice for the period ending 31 March 2011.

	Production (Units)	Sales (Units)
Budget	60 000	58 000
Actual	64 000	62 000

	Variable Production Cost	Fixed Production Overhead	Fixed Selling Overhead
	$	$	$
Budget	3 000 000	600 000	450 000
Actual	3 200 000	625 000	450 000

The fixed production overhead was absorbed at a predetermined rate per unit produced.

One bottle of orange juice was sold for $95. At the beginning of April 2010, there was an opening inventory of 3 500 units valued at $210 000; this includes fixed production overhead of $35 000.

1. Prepare a marginal costing income statement for the company. [7 marks]

2. Prepare an absorption costing income statement for the company. [7 marks]

Reconcile the difference between the net operating income computed under marginal costing and that computed under absorption costing. [2 marks