During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given:

The company's $20 unit product cost is computed as follows:

Required:
1. Prepare an absorption costing income statement for each year.
2. Reconcile the absorption costing and variable costing operating income figures for each year.

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Units produced Units sold.... Fixed expenses: Fixed manufacturing overhead. Fixed selling and administrative.. Total fixed expenses. Operating income (loss). **** ***. Sales (at $50 per unit)... Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit). Total variable expenses... Contribution margin. .... ..... Year 1 25,000 20,000 Year 2 25,000 30,000 Year 1 $1,000,000 400,000 60,000 460,000 540,000 350,000 250,000 600,000 $ (60,000) Year 2 $1,500,000 600,000 90,000 690,000 810,000 350,000 250,000 600,000 $ 210,000