6: Talent Without Results Inc (TWR) is in the first year of producing hats bearing the logo of the spectacularly unsuccessful local football team, the Cowpokes at $20 per hat. The operation is being run by Stephan whose father Jerrah is the CEO. Their initial production plan for the year was as follows: Material costs $10 per hat. Direct Labor costs (strictly variable) $6 per hat. Variable manufacturing OH $1.75 per hat. Fixed manufacturing OH $288,000 per year. The actual sales till November were 110,000 units and they expected to sell 10,000 units in December. They generally produced what they needed each month and did not carry inventory. Stephan was concerned that he would have to report a loss in the first year to his dad. He consulted his friend Mikey M. Mikey said, "Hey, just produce another 34,000 units in December instead of 10,000 units and use absorption costing based on actual costing to allocate your fixed overhead and you won't have a loss to report. If you do this, the cost per unit would be lower since you are spreading the costs over more units produced and these excess units will be placed in inventory at full