The Valley Fireworks Limited ("Valley") manufactures special firework display kits to sell to responsible organisations only. The following information is taken from its budget for 2021: $ per unit $ per annum Selling price 500 Direct materials 60 Direct labour 180 Variable production overhead 10 Variable distribution overhead Fixed production overhead 96,000 Fixed administrative overhead 144,000 20 The budget is assumed that opening and closing inventory are 20 kits and annual production equals to annual sales which are 1,200 kits. Its financial ended is on 31 December. The actual production and sales volumes for 2021 were: Units Opening inventory Production Sales Closing inventory Q1 10 300 20 290 Q2 290 300 40 550 Q3 550 200 60 690 Q4 690 300 980 10 The variable costs per kit and the total fixed costs were as budget. 1 Required: a. Prepare income statement of The Valley for each of the four quarters and the year of 2021 under the absorption costing method. (39 marks) b. Prepare income statement of The Valley for each of the four quarters and the year of 2021 under the variable costing method. (21 marks) c. Reconcile The Valley's operating income reported under absorption and variable costing for each quarter and the year of 2021. (10 marks)