"This makes no sense at all." said Sulaiman, the Managing Director of Sense Sdn Bhd. "We sold the same number of units this year as we did last year, yet our profits have more than doubled. Who made the mistake? The computer or the people who operate it?" The statements to which Sulaiman 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 as shown below: Sense Sdn Bhd applies fixed manufacturing overhead costs to its only product on the basis of each year's production. Thus, a new fixed manufacturing overhead rate is computed each year. Compute the unit product cost for each year under, absorption costing and variable costing. Reconcile the absorption costing and variable costing net operating income tor each Year 1 and Year 2. The net operating income for Year 2 was higher than for Year 1 under absorption costing, although the same number of units was sold in each year Why is that so? Explain