PROBLEM 6-18 Variable Costing Income Statement; Reconciliation [LO2, LO3] During Denton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $50 per unit) $1,000,000 $1,500,000 Cost of goods sold (@ $34 per unit) 680,000 1,020,000 Gross margin 320,000 480,000 Selling and administrative expenses*. 310,000 340,000 Net operating income. $ 10,000 $ 140,000 *$3 per unit variable; $250,000 fixed each year. The company's $34 unit product cost is computed as follows: Direct materials Direct labor. Variable manufacturing overhead. Fixed manufacturing overhead ($350,000 25,000 units) Absorption costing unit product cost. Production and cost data for the two years are given below: Year 1 Year 2 Units produced 25,000 25,000 Units sold 20,000 30,000 $ 8 10 2 14 $34 Required: 1. 2. Prepare a variable costing contribution format income statement for each year. Reconcile the absorption costing and variable costing net operating income figures for each year.