In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% durlng Year 2 even though production Increased during the year. Management had expected sales to remain constant at 53,600 units; the Increased production was designed to provide the company with a buffer of protectlon agalnst unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excesslve Inventorles, Starfax cut back production during Year 3, as shown below: Additional Information about the company follows: a. The company's plant is highly automated. Varlable manufacturing expenses (direct materlals, direct labor, and varlable manufacturing overhead) total only $2.00 per unlt, and fixed manufacturing overhead expenses total $514,560 per year. b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of units produced. c. Varlable selling and administrative expenses were $1 per unit sold in each year. Fixed selling and administratlve expenses totaled $142,880 per year. d. The company uses a FIFO Inventory flow assumption. (FIFO means first-In first-out. In other words, it assumes that the oldest units in Inventory are sold first.) Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was Incurred during Year 3 when sales recovered to previous levels. Required: 1. Prepare a varlable costing Income statement for each year. 2. Refer to the absorption costing Income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost Is varlable and how much is fixed. b. Reconclle the varlable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating Income (or loss) have been In each year under absorption costing? Complete this question by entering your answers in the tabs below. Reconcile the variable costing and absorption costing net operating income figures for each year. (Enter any losses or deductions as a negative value.) c. Varlable selling and administratlve expenses were $1 per unit sold in each year. Fixed selling and adminlstratlve expenses totaled $142,880 per year. d. The company uses a FIFO Inventory flow assumption. (FIFO means first-In first-out. In other words, It assumes that the oldest units in Inventory are sold first.) Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was Incurred durling Year 3 when sales recovered to prevlous levels. Requlred: 1. Prepare a varlable costing Income statement for each year. 2. Refer to the absorption costing Income statements above. a. Compute the unlt product cost in each year under absorption costing. Show how much of this cost is varlable and how much is fixed. b. Reconclle the varlable costing and absorption costing net operating Income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating Income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. Prepare a variable costing income statement for each year. In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% during Year 2 even though production Increased during the year. Management had expected sales to remain constant at 53,600 units; the Increased production was designed to provide the company with a buffer of protectlon agalnst unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unllkely. To reduce the excessive Inventorles, Starfax cut back production during Year 3, as shown below: Additional Information about the company follows: a. The company's plant is highly automated. Varlable manufacturing expenses (direct materlals, direct labor, and varlable manufacturing overhead) total only $2.00 per unlt, and fixed manufacturing overhead expenses total $514,560 per year. b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of units produced. c. Varlable selling and administratlve expenses were $1 per unit sold in each year. Flxed selling and administratlve expenses totaled $142,880 per year. d. The company uses a FIFO Inventory flow assumption. (FIFO means first-In first-out. In other words, It assumes that the oldest units in Inventory are sold first.) Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was Incurred durling Year 3 when sales recovered to prevlous levels. Requlred: 1. Prepare a varlable costing Income statement for each year. 2 Refer to the absorption costing Income statements above. a. Compute the unlt product cost in each year under absorption costing. Show how much of this cost Is varlable and how much is fixed. b. Reconcile the varlable costing and absorption costing net operating Income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating Income (or loss) have been In each year under absorption costing? Complete this question by entering your answers in the tabs below. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% during Year 2 even though production Increased during the year. Management had expected sales to remain constant at 53,600 units; the Increased production was designed to provide the company with a buffer of protection agalnst unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excessive Inventorles, Starfax cut back production during Year 3, as shown below: Additional Information about the company follows: a. The company's plant is highly automated. Varlable manufacturing expenses (direct materlals, direct labor, and varlable manufacturing overhead) total only $2.00 per unlt, and fixed manufacturing overhead expenses total $514,560 per year. b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of unlts produced. c. Varlable selling and administrative expenses were $1 per unit sold In each year. Fixed selling and adminlstratlive expenses totaled $142,880 per year. d. The company uses a FIFO Inventory flow assumption. (FIFO means first-In first-out. In other words, It assumes that the oldest units in Inventory are sold first.) Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was Incurred during Year 3 when sales recovered to previous levels. Required: 1. Prepare a varlable costing Income statement for each year. 2 Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is varlable and how much is fixed. b. Reconclle the varlable costing and absorption costing net operating Income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Starfax, Incorporated, manufactures a small part that is widely used in varlous electronlc products such as home computers. Results for the first three years of operations were as follows (absorption costing basis): In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% durlng Year 2 even though production Increased during the year. Management had expected sales to remaln constant at 53,600 unlts; the Increased production was designed to provide the company with a buffer of protection agalnst unexpected spurts in demand. By the start of Year 3, management could see that it had excess Inventory and that spurts in demand were unllkely. To reduce the excesslve Inventorles, Starfax cut back production during Year 3, as shown below: Additional Information about the company follows: a. The company's plant is highly automated. Varlable manufacturing expenses (direct materlals, direct labor, and varlable manufacturing overhead) total only $2.00 per unlt, and fixed manufacturing overhead expenses total $514,560 per year. b. A new fixed manufacturlng overhead rate is computed each year based on that year's actual fixed manufacturlng overhead costs divided by the actual number of units produced. c. Varlable selling and administrative expenses were $1 per unit sold In each year. Flxed selling and administratlive expenses totaled $142,880 per year. d. The company uses a FIFO Inventory flow assumption. (FIFO means first-In first-out. In other words, it assumes that the oldest units in Inventory are sold first.) Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was Incurred during Year 3 when sales recovered to prevlous levels. Requlred: 1. Prepare a varlable costing Income statement for each year. 2. Refer to the absorption costing Income statements above. a. Compute the unlt product cost in each year under absorption costing. Show how much of this cost Is varlable and how much is fixed. b. Reconclle the varlable costing and absorption costing net operating income figures for each year. 5 b. If Lean Production had been used durlng Year 2 and Year 3, what would the company's net operating Income (or loss) have been In each year under absorption costing? Complete this question by entering your answers in the tabs below. Prepare a variable costing income statement for each year