Due on Nov 20, 9:15 am Madison Company uses an actual cost system to apply all manufacturing costs to the units produced. Although production has a maximum capacity of 40 million units, only 10 million units were produced and sold during Year 1. The Company's variable product cost per unit is $1, and total xed overhead cost per year is $24,000,000. There were no beginning or ending inventories. Madison's Year 1 Income Statement is presented below: Year 1 Income Statement (Production = Sales = 10,000,000 units) Sales (10,000,000 units @ $3) $30,000,000 Less: Cost of Goods Sold: (34,000,000) Gross Margin ($ 4,000,000) Less: Selling 8: Adm. Expenses (all xed) (5,000,000) Net Operating Prot (Loss) ($ 9,000,000) The board of directors is concerned about the Year 1 loss. A consultant approached the board with the following offer: "I agree to become president for no xed salary. But I insist on a year-end bonus of 10% of operating prot (before considering the bonus)? The board agreed to these terms, and the consultant was hired. The new president promptly stepped up production to an annual rate of 30,000,000 units. Sales for Year 2 remained at 10,000,000 units. The resulting Madison Company income statement torYear2 is reported below: Year 2 Income Statement (Production 30,000,000 units; Sales = 10,000,000 units) Sales (10,000,000 units @ $3) $30,000,000 Less: Cost of Goods Sold: (18,000,000) Gross Margin $12,000,000 Less: Selling&Adm. Expenses (all xed) ( 5,000,000) Net Operating Prot $ 7,000,000 Less: Bonus (10%) (700,000) Operating Prot after Bonus $6,300,000