QUESTION 2 ABC Company manufactures and sells a unique electronic part. The company's pla highly automated with low variable and high fixed manufacturing costs. operating results on an absorption costing basis for the first three years of activity were follows: Year 1 Year 2 Year 3 S704,000 528,000 704,000 Cost of goods sold: Beginning inventory 220.000 Cost of goods manufactured 520.000 550,000 496.000 Goods available for sale 520,000 550,000 716,000 Less ending inventory 220.000 186,000 Cost of goods sold 520,000 330.000 530,000 Gross margin 184,000 198,000 174,000 Less selling and administrative expenses 180,000 160,000 180,000 Net income (loss) S4,000 S38,000 S(6,000) Additional information about the company is as follows: i. Variable manufacturing costs (direct labor, direct materials, and variable manufacturing ii. Fixed per unit, and fixed manufacturing overhead costs total units manufacturing costs are applied of product on the basis of the number of iii. The produced each year (ie., a new fixed overhead rate is computed each year). company uses a FIFO inventory flow assumption. iv. Variable selling and administrative expenses are S2 per unit sold. Fixed selling and administrative expenses total $100,000 Production and sales information for the years is as follows: Year I Year 2 Production in units Year 3 Sales in units 32,000