ABC produces sporting equipment. Below are condensed results for the first two years of operation. ABC has a December 31 year-end.

Year 1:
25,000	Units Produced
18,000	Units Sold
Year 2, the results were exactly reversed:
18,000	Units Produced
25,000	Units Sold
Each year the following unit prices were the same:
$100	Selling Price
$40	Variable Manufacturing Costs
$8	Variable Selling Costs
$540,000	Fixed Manufacturing Costs
$200,000	Fixed Administrative Expenses

Instructions

A. Calculate net income under variable costing for each year.

B. Calculate net income under absorption costing for each year.

C. Reconcile the differences each year in income from operations under the two costing approaches.