Lighting Company manufactures a mobile battery-powered lamp. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors and the government. During Lighting Company's first two years of operations, the company reported operating profit as follows (on an absorption costing basis): Sales (@ 50 per unit) Less cost of goods sold: Beginning inventory Add cost of goods manufactured (@36 per unit) Goods available for sale Less ending inventory (@36 per unit) Cost of goods sold Gross margin Year 1 Year 2 2,000,000 2,500,000 0 180,000 1,620,000 1,620,000 1,620,000 1,800,000 180,000 0 1,440,000 1,800,000 560,000 700,000