Harrington Manufacturing manufactures a single product that it will sell for $88 per unit. The company is looking to project its operating income for its first two years of operations. Cost information for the single unit of its product is as follows (Click the icon to view the data) During its first year of operations, the company plans to manufacture 19,000 units and anticipates selling 13,000 of those units. During the second year of its operations, the company plans to manufacture 19,000 units and anticipates selling 22,000 units (it has units in beginning inventory for the second year from its first year of operations). er . Direct material per unit produced $39 . Direct labor cost per unit produced $15 Variable manufacturing overhead (MOH) per unit produced $3 Variable operating expenses per unit sold $2 . Fixed manufacturing overhead (MOH) for each year is $228,000, while fixed operating expenses for each year will be $84,000. (6 esta e fo nits e fo 1. Prepare an absorption costing income statement for the following: a. The first year of operations b. The second year of operations 2. Before you prepare the variable costing income statements for Harrington, predict the company's operating income using variable costing for both its first year and its second year without preparing the variable costing income statements. Hint: Calculate the variable costing operating income for a given year by taking that year's absorption costing operating income and adding or subtracting the difference in operating income as calculated using the following formula: = Difference in operating income (Change in inventory level in units x Fixed MOH per unit) 3. Prepare a variable costing income statement for each of the following years. a. The first year of operations b. The second year of operations Read the requirements Requirement 1. Prepare an absorption costing income statement for (a) the first year of operations and (b) the second year of operations. Sales revenue Harrington Manufacturing Income Statement (Absorption Costing) (a) Year 1 (b) Year 2 Less Cost of goods sold Gross profit Less Operating expenses Operating income Requirement 2. Before you prepare the variable costing income statements for Harrington, predict the company's operating income using variable costing for statements Hint Calculate the variable costing operating income for a given year by taking that year's absorption costing operating income and adding or subm Difference in operating income (Change in inventory level in units x Fixed MOH per unit) Begin by calculating the difference in income each year using the formula provided. Change in inventory Yeat level in units Fixed MOH per unit Difference in operating income ring the Requirement 2. Before you prepare the variable costing ncome statements for Harrington, predict the company's operating income sing varable onding for both st year and is second year with statements Hnt Calculate the variable costing operating income for a given year by taking that year's absorption costing operating income and adding or subacting the difference in operating income as called ung t Difference in operating income-(Change in inventory level in unta x Fand MOH pr und Begin by calculating the difference in income each year uning the formula provided able in econe Change in inventory Yar 1 Fed MOH perunt Difference i Now predict Harington's operating income under variable costing for both es test year and its second year of operation Operating income Yua under variable costing 1 Requirement 3. Prepare a variable costing income statement for (a) the first year of operations and (b) the second year of operations. Harrington Manufacturing Contribution Margin Income Statement (Variable Costing) Sales revenue Less Variable expenses Variable cost of goods sold Variable operating expenses Operating expenses Less Fixed expenses Fixed manufacturing overhead Fixed operating expenses Operating income (a) Year 1 (b) Year 2