ABC Inc. produces two products: "Red" and "Yellow". The information provided below relates to the company's most recent financial year that has just passed. Factory energy cost (an indirect cost of each unit of output produced): $500,000 ABC's factory energy cost is almost entirely incurred by its machines to produce "Red" and "Yellow". Both products use the same machines. Number of direct labour hours per unit of output: Product Red 2 hours per unit Product Yellow 4 hours per unit Number of machine hours per unit of output: Product Red 7 hours per unit 7 hours per unit Product Yellow Number of units of output produced Product Red 700 units Product Yellow 200 units Which of the following statements about the company and the allocation of its factory energy cost (FE) to units of output in the company's most recent financial year is/are likely to be true: 1. FE will be part of the value of inventory of any unsold units (of output) on the company's balance sheet which is prepared under absorption costing principles. 2. Changing the allocation base that is used to allocate FE would not change the total amount of FE that is allocated to both its products (i.e. the sum of FE allocated to Red and FE allocated to Yellow would remain the same irrespective of the allocation base chosen). 3. Using units of output as the allocation base to allocate FE would result in a less accurate allocation (of FE) to each unit of output produced, compared to using machine hours as the allocation base Statement 1 only Statement 2 only Statement 3 only Statement 1 and 2 only Statement 1.2 and 3