PROBLEM 8-11 Variable Costing Income Statement; Reconciliation Lo2, L03) During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Year 2 Units produced Units sold Year 1 25,000 20,000 25.000 30,000 Year 1 Year 2 $1,500,000 $ 1.000.000 Sales (at $50 per unit) Variable expenses Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses 400,000 600,000 60,000 460,000 90.000 690,000 9459 Year 1 Year 2 $ 1.000.000 $1,500,000 400,000 600,000 Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) 60,000 460.000 540.000 90,000 690,000 810,000 350,000 250,000 600.000 (60.000) 350,000 250.000 600,000 $210,000 S The company's $20 unit product cost is computed as follows: Direct materials Direct labour Variable manufacturing overhead Unit product cost $ 8 10 2 $20 Required: 1. Prepare an absorption costing income statement for each year. The company's $20 unit product cost is computed as follows: Direct materials Direct labour Variable manufacturing overhead Unit product cost $ 8 10 2 $20 Required: 1. Prepare an absorption costing income statement for each year. 2. Reconcile the absorption costing and variable costing operating income figures for each year. Page 330