Chapter 6: Variable costing and segment reporting Question II2 The company's $18 unit product cost is computed as follows: During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the two years are Required: 1. Prepare a variable costing contribution format income statement for each year. 2. Reconcile the absorption costing and the variable costing net operating income figures for each year