Walsh Company manufactures and sells one product. The following information pertains to each of the companys first two years of operations:

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the companys product is $57 per unit.

Required:
1.	Assume the company uses variable costing:

a.	Compute the unit product cost for year 1 and year 2.

b.	Prepare an income statement for year 1 and year 2.

2.	Assume the company uses absorption costing:

a.	Compute the unit product cost for year 1 and year 2. (Round your answer to 2 decimal places.)

b.	Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places)

3.	Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.

Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $ 24 $ 17 $ 3 $ 2. $240,000 $90,000 Year 1 Year 2 Unit product cost $ 44 $ 44 Walsh Company Income Statement Year 1 Year 2 Sales $ 2,280,000 $ 2,850,000 Variable expenses 1,760,000 2,200,000 Variable cost of goods sold Variable selling and administrative 80,000 100,000 Total variable expenses 1,840,000 2,300,000 550,000 Contribution margin 440,000 Fixed expenses Fixed manufacturing overhead Fixed selling and administrative expense 240,000 240,000 90,000 90,000 Total fixed expenses 330,000 330,000 Net operating income (loss) $ 110,000 $ 220,000 Year 1 Year 2 Unit product cost $ 48.80 $ 50.00 Walsh Company Income Statement Year 1 Year 2 Sales $ 2,280,000 $ 2,850,000 1,952,000 328,000 2,850,000 Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) $ 328,000 $ 2,850,000 Year 1 Year 2 Variable costing net operating income (loss) Absorption costing net operating income (loss) $ 0 $ 0