Goofy Company's absorption costing income statements for the last two years are presented below:

Required: a. Compute the unit product cost in each year under variable costing. b. Prepare new income statements for each year using variable costing. c. Reconcile the absorption costing and variable costing net operating income for each year.

Year / Year 2 Sales......... $70,000 $90,000 Less cost of goods sold: Beginning inventory..... 0 6,000 Add cost of goods manufactured...... 48.000 48.000 Goods available for sale 48,000 54.000 Less ending inventory 6.0.0.0 0 Cost of goods sold....... 42.000 54.000 Gross margin............... 28,000 36,000 Less selling & admin. expenses 25.000 31.000 Net operating income. S 3.000 S 5,000 Data on units produced and sold in each of these years are given below: Year! Year 2 Units in beginning inventory..... 0 1,000 Units produced 8,000 8,000 Units sold.... 7,000 9,000 Fixed factory overhead totaled S16,000 in each year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold