The Valley Fireworks Corporation manufactures special firework display kits to sell to responsible organizations only. The following information is taken from its budget for 2002:

Opening stock of kits = closing stock of kits = 20 kits

Quarterly production = 300 kits and annual sales = 1,200 kits

The actual production and sales volumes for 2002 were:

Tasks:1.  Prepare profit statements for each of the four quarters and the year,a) using absorption costing;b) using variable costing.

2.  Reconcile the two profit figures for each quarter and prepare a summary statement in the following format:

3.  Explain how both sets of profit figures can be useful to the management of The Valley Fireworks Corporation.