Shanell Industrial Limited makes and sells one product, which has the following standard variable production costs per unit.

Rs.

Direct materials cost (2 kg at Rs.25 per kg) 50

Direct labour cost (3 hours at Rs.40 per hour) 120

Variable production overhead costs (Rs.10 per labour hour) 30

The budgeted selling price per unit is Rs.400 for the coming two years. The production

and sales budgets for the next two years are as follows:

2019 2020

Production in units 50,000 60,000

Sales in units 40,000 70,000

There is no opening inventory at the beginning of 2019. Budgeted and actual costs are as follows.

Fixed production overhead costs Rs.1,080,000

Fixed non-production overhead costs per annum Rs.2,000,000

Variable non-production overhead costs Rs.10 per unit sold

Fixed production overhead costs are absorbed based on a normal production level of 54,000 units per annum.

1. Prepare the income statements for 2020 under marginal costing and absorption costing.

2. Explain the difference between the profits under two approaches. Calculations are required to support your explanation.

Pls be fast