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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:

	Year 1			Year 2
Sales (in units)		3,000			3,000
Production (in units)		3,600			2,400
Production costs:
Variable manufacturing costs	$	15,480		$	10,320
Fixed manufacturing overhead		19,080			19,080
Selling and administrative costs:
Variable		12,000			12,000
Fixed		11,000			11,000

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

LEHIGHTON CHALK COMPANY
Selected Balance Sheet Information
Based on absorption costing	End of Year 1			End of Year 2
Finished-goods inventory	$	5,760		$	0
Retained earnings		8,700			13,840
Based on variable costing	End of Year 1			End of Year 2
Finished-goods inventory	$	2,580		$	0
Retained earnings		5,520			13,840

Required:

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)

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Required1Required 2Required 3 Required 4Required 5 Required 6 Reconcile Lehighton's 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) Show less Year 1 Year 2 35,160 12,900 48,060 30,080 17,980 Cost of goods sold under absorption costing 28,800$ 12,900 41,700 $ 30,080 11,620 $ riable manufacturing costs under variable costing Subtotal ixed manufacturing overhead as period expense under variable costing Total 0 Operating income under variable costing Required 2> Operating loss under variable costing