QUESTION 1 [30 MARKS] Read the following information and answer the questions that follow. Thotho manufactures headscarves. The following information is available in her books on December 31, 2012.

Opening inventory 1,500 Headscarves made during the year 9,000 Headscarves sold during the year 9,500 Closing inventory 1,000 Selling price 90 Manufacturing costs: Variable costs: - Direct material/headscarf 25 - Direct labour hour cost used to 9 make one scarf - Variable manufacturing 5 overhead Fixed manufacturing overheads per 150 000 year Selling and administrative costs: Commission paid for selling one scarf 10 Fixed selling and administration costs per year 100,000 Required: a) Prepare the income statement for the year ended December 31, 2012 using i) Variable costing. (15 marks) ii) Absorption cost (15 marks)