2. Reconcile the absorption costing EBIT and the variable costing EBIT figures for each year by computing the deferred/released fixed overhead for each year and applying the proper adjustments.

During Heaton Company's first two years of operations, the company reported the absorption costing income statement as follows: The company's manufacturing cost per unit under absorption costing for both years is computed as follows: Production and sales data for the two years are: Note: Initial inventory of finished goods for year 1 is zero as it is the first year of operations. WIP inventories are not considered (i.e., initial and ending WIP inventories are always set to zero). 1. Prepare a variable costing contribution margin income statement for each year (Remember, as always, to show all the intermediate computations required to obtain all the figures in the statement)