2. Prepare an income statement for the year using the variable costing method. Explain the difference in operating income between the two costing methods. EXERCISE 8-3 Reconciliation of Absorption and Variable Costing Operating Incomes ILO3) Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all- season use. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the data for their swim spa business in years 1, 2, and 3 shown below. The company's fixed manufacturing overhead per unit was constant at $2,500 for all three years: Year 1 Year 2 Year 3 Inventories 180 150 Variable costing operating income$292.400 $269,200 150 160 160 200 $251800 Ending (units).. Required: 1. Determine each year's absorption costing operating income. Present your answer in the form of a reconciliation report, such as the one shown in Exhibit 8-6. 2. In year 4, the company's variable costing operating income was $240,200 and its absorption costing operating income was $205,200. Did inventories increase or decrease during year 4? How much fixed manufacturing overhead cost was deferred or released from inventory during year 4? EXERCISE 8-4 Evaluating Absorption and Variable Costing as Alternative Costing Methods LO4 The following questions involve the same manufacturing company in two different sets of circumstances. In both, the cost structure of the company is constant from year to year. Selling prices, unit variable costs, and total fixed costs are the same in every year. However, unit sales