Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $27 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehighton's first two years of operation is as follows:

Year 1Year 2

Sales (in units)3,0003,000

Production (in units)3,4002,600

Production costs:

Variable manufacturing costs.$18,360$14,040

Fixed manufacturing overhead22,44022,440

Selling and administrative costs:

Variable12,00012,000

Fixed11,00011,000

Selected information from Lehighton's year-end balance sheets for its first two years of operation is as follows:

LEHIGHTON CHALK COMPANY

Selected Balance Sheet Information

Based on absorption costingEnd of Year 1End of Year 2

Finished-goods inventory$4,800$0

Retained earnings16,50030,520

Based on variable costingEnd of Year 1End of Year 2

Finished-goods inventory$2,160$0

Retained earnings13,86030,520

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare operating income statements for both years based on variable costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Sales revenue Cost of goods sold: Beginning finished-goods inventory Cost of goods manufactured Cost of goods available for sale $ 0 $ 0 Ending finished-goods inventory Cost of goods sold Variable selling and administrative costs Total variable costs: EA 0 EA 0 Contribution margin $ 0 EA 0 Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs 0 0 Operating income $ 0 $ 0