Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $22 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 Lehightons first two years of operation is as follows:

1. Reconcile Lehightons operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement:

• Cost of goods sold
• Fixed cost (expensed as a period expense)
  • I got the title of the lines started but I'm not 100% confident that it's right. Specifically, I'm not sure if the second to last row is Less: Operating Income or Add: Operating Income

2. What was Lehightons total operating income across both years under absorption costing and under variable costing?

3. What was the total sales revenue across both years under absorption costing and under variable costing?

4. What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing?

5. Subtract the total costs expensed across both years [requirement (4)] from the total sales revenue across both years [requirement (3)]: (a) under absorption costing and (b) under variable costing.

Sales (in units) Production (in units) Production costs: Year 1 2, 300 2,700 Year 2 2, 300 1,900 Variable manufacturing costs Fixed manufacturing overhead $ 9,720 6,840 13,230 13,230 Selling and administrative costs: Variable Fixed 9,200 8, 200 9,200 8, 200 Selected information from Lehighton's year-end balance sheets for its first twyears of operation is as follows LEHIGHTON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing Finished-goods inventory Retained earnings End of Year 1 8,150 End of Year 1 6,190 End of Year 2 15,180 End of Year 2 15,180 $3,400 Based on variable costing Finished-goods inventory Retained earnings $1,440 Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the ollowing two amounts on each income statement: Cost of goods sold Fixed cost (expensed as a period expense) Year 1 Year 2 ost of goods sold under absorption costing ariable manufacturing costs under variable costing ubtotal ixed manufacturing overhead as period expense under variable costing otal perating income under variable costing ess: Operating income under absorption costing ifference in operating income