You work for a firm of management consultants that offers assistance to new businesses. One of your clients is Metlock Manufacturing, a company that manufactures a small, but vital, component for the specialized lighting industry. Metlock is a new company (and a new client for your employer) and you have been assigned the task of advising it of its options for financing its inventory during the first few months. The marketing experts have told you that Metlock should have at least three months of inventory on hand so it can meet all demands from its customers. The annual production of the Metlock component is projected to be 124,800 units. Annual direct labour and direct material costs together are estimated at $312,000 per year. Variable manufacturing costs are estimated to be $187,200 per year; fixed manufacturing costs are projected to be $520,000 per year. Fixed marketing and administration costs are estimated at $728,000 per year. These projections are all for the company's first year of business. (a) Assuming that Metlock must hold three months of the component in inventory, what is the cost of the three-month inventory using variable costing? What is the cost of inventory using absorption costing? Variable Costing Absorption Costing Three-month inventory cost $