Starfax, incorporated, manufactures a small part that is widely used in various electronic products such as home computers. Results for the first three years of operations were as follows (absorption costing basist: result, Starfax's sales dropped by 20% went out of business and in the process dumped a large number of units on the market. As a sales to remain constant at 50,200 units; the increased though production increased during the year. Management had expected against unexpected spurts in demand. By the start of Year 3. management could see provide the company with a buffer of protection demand were unlikely. To reduce the excessive inventories. Starfagement could see that it had excess inventory and that spurts in "luction during Year 3 , as shown below: a. The company's plant is highly automated. Variable monufacturing expenses (direct materials, direct labor, and variablo manufacturing overhead) total only $2.00 per unit, and fixed manufacturing overhead expenses total $481,920 per year. b. A new fixed manufacturing overhead tate is computed each year based on that year actual fixed manufacturing overhead costs civided by the actual number of units produced. c. Variable selling and s140,160 per year inventory are sold first.) during Year 3 when sales recovered to why profits doubled during Year 2 when sales dropped by 2005 and why a loss was incurred Required: 1. Prepare a variable costing income statement for each ycar. 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 variable and how much is fixed. b. Reconcie the variable costing and absorption costing net operoting income figures for each year: 5b. If Lean Production had been used Ining Year 2 and Year 3 . whot woold the company's net operating income (or loss) have beon