During Heaton Company's first two years of operations, the company reported absorption costin net operating income as follows: Year 1 Year 2 Sales (@ $25 per unit) .. Cost of goods sold (@ $18 per unit) Gross margin... Selling and administrative expenses* $1,000,000 720,000 $1,250,000 900,000 280,000 350,000 230,000 210,000 Net operating income... . .. $ 70,000 $120,000 *$2 per unit variable; $130,000 fixed each year. E 2019-05-.. The company's $18 unit product cost is as follows: computed $ 4 Direct materials Direct labor. Variable manufacturing overhead Fixed manufacturing overhead ($270,000 7 1 45,000 units).. Absorption costing unit product cost . $18 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder con- sists of depreciation charges on production equipment and buildings. Production and cost data for the two years are: Year 1 Year 2 Units produced. 45,000 45,000 Units sold 40,000 50,000 Required: 1. Prepare a variable costing contribution format income statement for each year 2. Reconcile the absorption costing and the variable costing each year. operating income figures for net