Rio Ltd makes and sells two products, Sham and Wham. The following information is available for period 3: . As the Accountant you have been asked to do the following:

	sham	Wham
Production (units)	7500	5400
Sales (units)	7000	3600
Opening Stock (units)	480	300
Budgeted Capacity (units)	8000	5000
Financial Data
Unit Selling Price	115	110
Unit Cost
Direct Materials	25	10
Direct Labour	35	10
Variable Production Overheads	15	5
	75	25
Fixed Production Overheads	30	20

a. Prepare an income statement based on marginal costing principles. (12 marks)

b. Prepare an income statement based on absorption costing principles. (14 marks)