The following questions involve the same manufacturing company in two different sets of circumstances. In both, the cost structure of the company is constant from year to year. Selling prices, unit variable costs, and total fixed costs are the same in every year. However, unit sales and/or unit production levels may vary from year to year.

Required:

1. Consider the following data for scenario A:

	Year 1			Year 2			Year 3
Variable costing operating income	$	16,847		$	16,847		$	16,847
Absorption costing operating income	$	16,847		$	29,378		$	6,018

a. This part of the question is not part of your Connect assignment.

b. What was the relationship between unit sales and unit production levels in each year? For each year, indicate whether inventories grew or shrank.