Absorption Costing and Ethics

"There must be something wrong with these statements!" exclaimed Hugh Richards, president of Ajax Inc. "They just don't make sense. We sold the same number of units this year as we did last year, yet our profit have tripled! Who messed up the calculations?

Ajax Inc. Is a medium size supplier of plastic components to the automobile industry and has been in business for $25$ years. Sales forecasting has been relatively easy to do in the past since Ajax has had long$-$term, single$-$sourcing relationship with most of its customers. In $2018,$ however, there was a threat of a strike at one of Ajax Inc.$\text{'}$s major raw materials suppliers. For that reason, Ajax management decided to purchase more raw materials and produce more components in $2018$ than actually required, in anticipation of raw materials shortzges in $2019.$ Manufacturing equipment

ALGONGUIA:

was typically operated below capacity, so this boost in production was possible without incurring significant increased fix manufacturing costs. The income statement and production reports to which Richards was referring are shown below.

$($Canada$)$

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