Bennetts Manufacturing started business on 1 April 2014, and incurred the following costs during its first two years.

Year ending 31 March	2014	2015
	$	$
Direct materials	60,000	49,900
Direct labour	48,000	44,000
Variable overheads	24,000	30,000
Fixed costs	40,000	40,600
Production each year (units)	16,000	14,000
Sales each year (units)	14,000	14,000

Required:

Prepare a statement showing the gross profit for each of the three years if the company used:

The marginal costing approach to valuing inventory; (15 marks)

The absorption costing approach to valuing inventory. (15 marks)

Advise the company of the advantage and disadvantages of using each method.

(10 marks)