'This makes no sense at all,' said Bill Sharp, managing director of Essex Company. 'We sold the same number of units this year as we did last year, yet our profits have more than doubled. Who made the goof the computer or the people who operate it?' The statements to which Mr Sharp was referring are shown below (absorption costing basis): The statements above show the results of the first two years of operation. In the first year, the company produced and sold 20,000 units; in the second year, the company again sold 20,000 units, but it increased production in order to have a inventory of units on hand, as shown below: Essex Company produces a single product; fixed manufacturing overhead costs are applied to the product on the basis of each year's production. (Thus, a new fixed manufacturing overhead rate is computed each year.) Variable selling and administrative expenses are 1 per unit sold. Required: 1.Compute the unit product cost for each year under absorption costing and variable costing. (Round your answers to 2 decimal places.) 2.Prepare a statement of profit and loss for each year, using the contribution approach with variable costing. (Enter all answers as a positive values except losses which should be indicated with a minus sign.) 3. Reconcile the variable costing and absorption costing profit figures for each year. 4.Under absorption costing, the profit for Year 2 was higher than the profit for Year 1 possibly because of good cost control by management. True False 5.(a)Operations would not have differed in Year 2 if the company had been using JIT inventory methods. True False (b)Under absorption costing, if JIT has been in use during Year 2, the company's profit in Year 2 would have been: lower than what has been reported. higher than what has been reported. the same as what has been reported. unknown