Accounting

ElectronPlus manufactures and sells a unique electronic part. Operating results for the first three years of activity were as follows (absorption costing basis): Year 1 Year 2 Year 3 Sales $1, 043, 000 $834, 400 $1, 073, 090 Cost of goods sold: Beginning inventory 273, 000 Add: cost of goods 811, 000 837, 000 763, 000 manufactured Goods available for sale 811, 000 hey, 000 1, 036, 000 Less: ending inventory 0 273, 000 168, 000 Cost of goods sold 811, 000 564, 000 868, 000 Gross margin 232, 000 270, 400 205, 000 Selling and administrative expenses 161, 000 57, 400 212, 000 Operating income (loss) $ 71, 000 $213, 000 $ (7, 090) Sales dropped by 20% during year 2 due to the entry of several foreign competitors into the market. ElectronPlus had expected sales to remain constant at 53,000 units for the year; production was set at 63.000 units in order to build a buffer against unexpected spurts in demand. By the start of vear 3