excel PROBLEM 7-11 Variable Costing Income Statement, Reconciliation (LO2, L03] During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $25 per unit) $1,000,000 $1,250,000 Cost of goods sold (@ $18 per unit) 720,000 900,000 Gross margin 280,000 350,000 Selling and administrative expenses 210,000 230,000 Net operating income. $ 70,000 $ 120,000 $2 per unit variable: $130,000 fixed each year. The company's $18 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($270,000 -45,000 units) Absorption costing unit product cost $ 4 7 1 $18 Forty pereent of fixed manufacturing overhead consists of wages and salaries; the remainder con- sists of depreciation charges on production equipment and buildings Production and cost data for the two years are: Year 1 Year 2 Units produced 45,000 45,000 Units sold 50,000 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. 40,000