During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Year 1 Year 2 25,000 25,000 20,000 30,000 Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) The company's $20 unit product cost is computed as follows: Direct labour Direct materials $ 8 10 Variable manufacturing overhead 2 $20 Unit product cost Required: 1. Prepare an absorption costing income statement for each year. Year 1 $1,000,000 Year 2 $1,500,000 400,000 600,000 60,000 90,000 460,000 690,000 540,000 810,000 350,000 350,000 250,000 250,000 600,000 600,000 $ (60,000) $ 210,000 Required: 1. Prepare an absorption costing income statement for each year. Absorption Costing Income Statements Sales Cost of goods sold: Cost of goods sold Year 1 Year 2 0 0 0 0 0 $ 0 $ 0 2. Reconcile the absorption costing and variable costing operating income figures for each year. (Loss amounts should be indicated by a minus sign.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Variable costing operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing operating income (loss)