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