Mahmood, the finance manager, argued that it is wrong decision to reduce the selling price of the personalized mugs the houseware department manufactures. He said that reducing the price does not give them advantage over the competitors. However, Ahmed Ali explained that the selling price reduction gives lower contribution margin but increases the inventory turnover. Relevant to this, he gave the following production data. The houseware department manufactures personalized mugs used as token on various corporate events. There were 2,000 mugs sold for OMR 3.950 each in 2019. Cost Unit price in OMR Direct materials OMR 1.100 Direct labour OMR 0.900 Variable overhead OMR 0.100 Variable selling costs OMR 0.150 Fixed manufacturing OMR 2,200 Fixed non-manufacturing costs OMR 2,200 Fixed selling expenses OMR 500 1. Based from the given data, prepare the income statement using the variable and absorption costing. 2. If Ahmed Ali decides to reduce the selling price of the product to OMR 3, prepare the income statement using both the costing methods. 3. Discuss whether the decision to reduce the selling price is favorable or unfavorable