Please check my work:

uring Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows:

Year 1Year 2Sales (@ $63 per unit)$1,008,000$1,638,000Cost of goods sold (@ $37 per unit)592,000962,000Gross margin416,000676,000Selling and administrative expenses*300,000330,000Net operating income$116,000$346,000

* $3 per unit variable; $252,000 fixed each year.

The company's $37 unit product cost is computed as follows:

Direct materials$6Direct labor9Variable manufacturing overhead3Fixed manufacturing overhead ($399,000 21,000 units)19Absorption costing unit product cost$37

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists

of depreciation charges on production equipment and buildings.

Production and cost data for the two years are:

Year 1Year 2Units produced21,00021,000Units sold16,00026,000

Required:

1. Prepare a variable costing contribution format income statement for each year.

2. Reconcile the absorption costing and the variable costing net operating income figures for each year.