1. Absorption costing income statement of a company for the first two years is as follows: Year-1 Year-2 Sales 2,000,000 3,000,000 Less cost of goods sold: Beginning inventory 0 340,000 Add cost of goods manufactured 1,700,000 1,700,000 Goods available for sale 1,700,000 2,040,000 Less ending inventory 340,000 Cost of goods sold 1,360,000 2,040,000 Gross margin 640,000 480,000 Less selling and administrative expenses* 620,000 680,000 Net operating income 20,000 280,000 "6 per unit variable; $500,000 fixed each year. The manufacturing cost per unit is computed as follows: Direct materials $16 Direct labor $20 Variable manufacturing overhead Fixed manufacturing overhead $28 $68 Sales and production for two years: Year-1 Year-2 Units produced 25,000 25,000 Units sold 20,000 30,000 Required: a. Prepare a variable costing (contribution margin) income statement. b. Reconcile net operating income figures