Refer to the companys operating results reflected in Table 1. Prepare a brief report (not more than 250 words) to AECs senior management to explain the fluctuations in net operating income from 2019 to 2021.

Alpha Electronics Corp (AEC) manufactures and sells a unique intermediate component part that is widely used in various household electronic products. Operating results for the latest three financial years were as follows: Table 1 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income / loss) 2019 $1,000,000 760,000 240,000 230,000 $10.000 2020 2021 $800,000 $1.000.000 512,000 788,500 288,000 211,500 198.000 230,000 $90,000 $(18.500) As the industry matures, the company is facing stiff competition from several regional players. Sales dropped 20% during 2020, against an original expectation of 40,000 units. Production for 2020 was budgeted at 50,000 units so as to build a sufficient buffer to prevent any stock- out situation from unexpected demand surge. The excess stocks from 2020 was carried over into 2021, and accordingly the budgeted production for 2021 was cut. 2019 2020 2021 Production in units 40,000 50,000 32,000 Sales in units 40,000 32,000 40,000 There are the following additional information about the AEC: Fixed manufacturing overhead costs $600,000 per annum Fixed selling and administrative costs $70,000 per annum Variable costs per unit: Manufacturing cost $4 Selling and administrative cost $4 The fixed manufacturing overhead costs are applied to units of production on the basis of actual production for the year. The company uses the FIFO inventory flow assumption. There were no opening inventories for 2019. AEC's senior management is perplexed as to why the operating results does not fluctuate in tandem with the sales mmbers