George Fine Company produces shoes and wallets. Selected data for the past year follow:

Shoes Wallets

Production (units) 90,000 190,000

Sales (units) 80,000 200,000

Selling price 7 9

Direct labour hours 80,000 60,000

Manufacturing costs:

Direct Materials per unit 0.75 0.5

Direct Labour per unit 2.5 2.0

Variable overheads per unit 0.20 0.13

Fixed overhead:

Direct 70,000 70,000

Non-manufacturing costs:

Variable selling 30,000 60,000

Direct fixed selling 60,000 65,000

Budgeted fixed overhead for the year, 140,000, equalled the actual fixed overhead. Fixed overhead is assigned to products using a plantwide rate based on expected direct labour hours, which were 140,000. The company had 10,000 wallets in inventory at the beginning of the year. These wallets had the same unit cost as the wallets produced during the year.

Required:

a) Prepare an income statement using marginal costing.

b) Prepare an income statement using absorption costing.

c) Prepare a reconciliation statement between Absorption and Marginal costing profit figures calculated above.