Problem 6-19A Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] During Heaton Companys first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 1,098,000 $ 1,708,000 Cost of goods sold (@ $36 per unit) 648,000 1,008,000 Gross margin 450,000 700,000 Selling and administrative expenses* 306,000 336,000 Net operating income $ 144,000 $ 364,000 * $3 per unit variable; $252,000 fixed each year. The companys $36 unit product cost is computed as follows: Direct materials $ 8 Direct labor 12 Variable manufacturing overhead 3 Fixed manufacturing overhead ($299,000 23,000 units) 13 Absorption costing unit product cost $ 36 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: Year 1 Year 2 Units produced 23,000 23,000 Units sold 18,000 28,000 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. (Losses and deductions should be indicated with a minus sign.)