ElectronPlus manufactures and sells a unique electronic part. Operating results for the first three years of activity were as follows

$($absorption costing basis$)$:

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 $40,000$ units for the year, production was set at $50,000$ units in order to build a buffer against unexpected spurts

in demand. By the start of year $3,$ management could see that spurts in demand were unlikely and that the inventory was excessive. To

work off the excessive inventories, ElectronPlus cut back production during year $3,$ as shown below:

Additional information about the company follows:

a$.$ The company's plant is highly automated. Variable manufacturing costs $($direct materials, direct labour, and variable manufacturing

overhead$)$ total only $$4$ per unit, and fixed manufacturing overhead costs total $$665,000$ per year.

b$.$ Fixed manufacturing overhead costs are applied to units of product on the basis of each year's planned production. $($That is$,$ a new

fixed overhead rate is computed each year$).$

c$.$ Variable selling and administrative expenses are $$2$ per unit sold. Fixed selling and administrative expenses total $$71,600$ per year.

d$.$ The company uses a FIFO inventory flow assumption.

The management of ElectronPlus can't understand why profits tripled during year $2$ when sales dropped by $20\%,$ and why a loss was

incurred during year $3$ when sales recovered to previous levels.

Required:

Prepare a contribution format income statement for each year using variable costing.