Question 1 Grinch Company's first two years of operation, the company reported absorption costing net operating income as follows: Year 1 Year 2 (RM) (RM) Sales @ RM25 per unit 1,000,000 1,250,000 Cost of goods sold @ RM18 per unit 720,000 900,000 Gross Margin 280,000 350,000 Selling and administration expenses * 210,000 230,000 Net operating income 70.000 120,000 Units produced 45,000 units 45,000 units Units sold The company's product cost is computed as follows: 40,000 units 50,000 units Direct material Direct labour Variable manufacturing overhead Fixed manufacturing overhead RM4 RM7 RM 1 RM 270,000 *Variable selling and admin expenses = RM2 per unit of units sold Other information: 60% of fixed manufacturing overhead consists of wages and salaries and the remainder consists of depreciation charges on production equipment and buildings. Required: a) Prepare a marginal costing format income statement for Year 1 and Year 2. (20 marks) b) Explain the marginal costing method. (5 marks)