During Heaton Company's first two years of operations, the company reported profit as follows $($absorption costing basis$)$:

Year $1$ Year $2$

Sales $($@ $32)1,296,0001,616,000$

Less cost of goods sold:

Beginning inventory $0110,000$

Add cost of goods manufactured $($@ $22\mathrm{.}0)1,001,0001,001,000$

Goods available for sale $1,001,0001,111,000$

Less ending inventory $($@ $22\mathrm{.}0)110,0000$

Cost of goods sold $891,0001,111,000$

Gross margin $405,000505,000$

Less selling and administrative expenses$*301,000321,000$

Profit $104,000184,000$

$*2$ per unit variable; $220,000$ fixed each year.

The company's $22\mathrm{.}0$ unit product cost is computed as follows:

Direct materials $4$

Direct labour $7$

Variable manufacturing overhead $1$

Fixed manufacturing overhead $(455,000/45,500$ units$)10\mathrm{.}0$

Unit product cost $22\mathrm{.}0$

Production and cost data for the two years are:

Year $1$ Year $2$

Units produced $45,50045,500$

Units sold $40,50050,500$

Required:

$1.$ Prepare a statement of profit or loss for each year in the contribution format using variable costing.

The unit product cost under the variable costing method would be computed as follows:

Direct materials $4$

Direct labour $7$

Variable manufacturing overhead $1$

Unit product cost $12$

With this figure, the variable costing profit statements can be prepared: $($Enter all answers as a positive values.$)$

$2.$ Reconcile the absorption costing and the variable costing profit figures for each year. $($Enter all answers as a positive values.$)$