A Your firm has been trading for three years. It has used a marginal costing approach to the valuation of stock-in-trade in its final accounts. Your directors are interested to know what the recorded profits would have been if the absorption cost approach had been used instead. Draw up the three year's accounts using both methods.

(a) Fixed factory overhead is \(£ 16,000\) per annum.

(b) Direct labour costs per unit over each of the three years \(£ 4\) per unit.

(c) Direct material costs over each of the three years \(£ 3\) per unit.

(d) Variable overheads which vary in direct ratio to production were \(£ 5\) per unit.

(e) Sales are: Year 19,000 units; Year 210,000 units; Year 315,000 units. All at \(£ 16\) per unit.

(f) Production is at the rate of: Year 110,000 units; Year 212,000 units; Year 316,000 units.