[The following information applies to the questions displayed below.] Huron Chalk Company manufactures sidewalk chalk which it sells online by the box at $22 per unit. Huron uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in- process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Huron's first two years of operations is as follows: Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative expenses: Variable Fixed Year 1 Year 2 3,100 3,100 3,600 2,600 $15,840 $ 11,440 19,440 19,440 12,400 12,400 11,400 11,400 Selected information from Huron's year-end balance sheets for its first two years of operation is as follows: HURON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing End of Year 1 End of Year 2 Finished-goods inventory Retained earnings* $4,900 8,520 $ 0 14,440 Based on variable costing Finished-goods inventory Retained earnings* End of Year 1 End of Year 2 $2,200 5,820 $ 0 14,440