Thank you very much, I know its a rather lengthy question but its greatly appreaciated

John Ovard, president of Mylar Inc., is looking forward to receiving the company's second-quarter income statement. He knows the sales budget of 20,000 units sold was met during the second quarter and that this represented a 25% increase in sales over the first quarter. He is especially happy about the increase in sales, since Mylar is about to approach its bank for additional loan money for expansion purposes. He anticipates that the strong second quarter results will be a real plus in persuading the bank to extend the additional credit. For this reason, Ovard is shocked when he receives the second-quarter income statement below, which shows a substantial drop in absorption costing operating income from the first quarter Mylar Inc. Income Statement For the first two quarters Quarter 1 Quarter 2 Sales $1,600,000 $2,000,000 Cost of goods sold $210,000 1400,000 1,610,000 490,000 $490,000 980,000 1,470,000 70,000 240,000 Opening inventory Add: cost of goods manufactured Less: ending inventory Add: underapplied overhead Gross margin Selling and administrative expenses Operating income 0 1,120,000 480,000 310,000 $170,000 1,640,000 360,000 330,000 $30,000