Duif Company's absorption costing income statements for the last two years are presented below:

__________________________________________Year 1 ______________Year 2

Sales ....................................................... $70,000 .................. $90,000

Less cost of goods sold:

Beginning inventory ............................................. 0 ..................... 6,000

Add cost of goods manufactured ......................... 48,000 .................... 48,000

Goods available for sale ................................... 48,000 ................... 54,000

Less ending inventory ....................................... 6,000 ......................... 0

Cost of goods sold .......................................... 42,000 ................... 54,000

Gross margin ................................................ 28,000 ................... 36,000

Less selling and admin. Expenses ........................ 25,000 ................... 31,000

Net operating income ...................................... $3,000 .................... $5,000

Data on units produced and units sold in each of these years are given below:

__________________________________________Year 1 ______________Year 2

Units in beginning inventory ................................. 0 ....................... 1,000

Units produced ............................................. 8,000 ....................... 8,000

Units sold ................................................... 7,000 ....................... 9,000

Fixed factory overhead totaled $16,000 in each year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

Required

a. Compute the unit product cost in each year under variable costing.

b. Prepare new income statements for each year using variable costing.

c. Reconcile the absorption costing and variable costing net income for each year.