During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:Year $1$Year $2$Sales $($@ $$25$ per unit$)$$ $1,000,000$$ $1,250,000$Cost of goods sold $($@ $$18$ per unit$)720,000900,000$Gross margin$280,000350,000$Selling and administrative expenses$*210,000230,000$Net operating income.$ $70,000$$ $120,000*$$$2$ per unit variable; $$130,000$ fixed each year.The company's $$18$ unit product cost is computed as follows:Direct materials$ $4$Direct labor$\mathrm{.}7$Variable manufacturing overhead$\mathrm{.}1$Fixed manufacturing overhead $($$$270,00045,000$ units$)6$Absorption costing unit product cost$ $18$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 twoRequired:a$.$ Prepare a variable costing contribution format income statement for each year.b$.$ Reconcile the absorption costing and the variable costing net operating income figures for each year.