1. Prepare a variable costing contribution format income statement for each year.

2. Reconcile the absorption costing and the variable costing net operating income figures for each year.

Please show work

During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Sales @ $60 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $1,080,000 630,000 450,000 299,000 $ 151,000 Year 2 $ 1,680,000 980,000 700,000 329,000 $371.000 *$3 per unit variable; $245,000 fixed each year. The company's $35 unit product cost is computed as follows: $ 8 11 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($345,000 + 23,000 units) Absorption costing unit product cost S 35 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the two years are: Units produced Units sold Year 1 23,000 18,000 Year 2 23,000 28,000