Your company has been trading for three years. It has used a marginal costing approach to value its stock in its financial statements. The directors are interested to know what the recorded profits would have been if absorption costing had been used instead. Using the following information, prepare a statement for each of the three years comparing both methods.

(a) Fixed indirect manufacturing costs are £64,000 per year.

(b) Direct labour costs per unit over each of the three years were £16 per unit.

(c) Direct material costs over each of the three years were £12 per unit.

(d) Variable expenses which vary in direct ratio to production were £20 per unit.

(e) Sales are: Year 1: 36,000 units; Year 2: 40,000 units; Year 3: 60,000 units. All at £64 per unit.

(f ) Production volumes were: Year 1: 40,000 units; Year 2: 48,000 units; Year 3: 51,000 units.