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 $ 1,073,000 Cost of goods sold: Beginning inventory 0 0 273,000 Add: cost of goods manufactured 811,000 837,000 763,000 Goods available for sale 811,000 837,000 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 $ (7,000 )