Earth Light FirstEarth$$Light$$First

$($ELFELF$),$

a producer of$$energy$-$efficient light$$bulbs$,$ expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the$$business$,$

ELFELF

has decided to evaluate its financial performance using absorption costing income. The$$production$-$volume variance is written off to cost of goods sold. The variable cost of production is

$ $2\mathrm{.}50$$$2\mathrm{.}50$

per bulb. Fixed manufacturing costs are

$ $1$ comma $015$ comma $000$$$1,015,000$

per year. Variable and fixed selling and administrative expenses are

$ $0\mathrm{.}40$$$0\mathrm{.}40$

per bulb sold and

$ $270$ comma $000$$$270,000,$

respectively. Because its light bulbs are currently popular with environmentally conscious$$customers$,$

ELFELF

can sell the bulbs for

$ $9\mathrm{.}70$$$9\mathrm{.}70$

each.

ELFELF

is deciding among various concepts of capacity for calculating the cost of each unit produced. Its choices are as$$follows: