[The following information applies to the questions displayed below.] Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $22 per unit. Lehighton 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 Lehighton's first two years of operation is as follows: Sales (in units) Production (in units) Production costs: Year 1 2,400 3,000 Year 2 2,400 1,800 Variable manufacturing costs Fixed manufacturing overhead $11,100 6,660 14,100 14,100 Selling and administrative costs: Variable Fixed 9,600 8,600 9,600 8,600 Selected information from Lehighton's year-end balance sheets for its first two years of operation is as follows LEHIGHTON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing Finished-goods inventory Retained earnings End of Year 2 15,040 End of Year 2 15,040 End of Year 1 $5,040 8,940 Based on variable costing Finished-goods inventory Retained earnings End of Year 1 $ 2,220 6,120