Operating data for ABC Company and its absorption costing income statements for the last two

years are presented below:

Year 1 Year 2
Units in beginning inventory ... -0- 3,000
Units produced ................. 18,000 18,000
Units sold ..................... 15,000 20,000

Sales ............................ Year 1 Year 2

$240,000 $320,000
Cost of goods sold:
Beginning inventory ............ -0- 30,000
Add cost of goods manufactured . 180,000 180,000
Goods available for sale ....... 180,000 210,000
Less ending inventory .......... 30,000 10,000
Cost of goods sold ........... 150,000 200,000
Gross margin ..................... 90,000 120,000
Selling & admin. expenses ........ 80,000 90,000
Net income ....................... $ 10,000 $ 30,000

Variable manufacturing costs are $6 per unit. Fixed manufacturing overhead totals $72,000 in
each year. This overhead is applied at the rate of $4 per unit. Variable selling and
administrative expenses were
$2 per unit sold.

a. What was the unit product cost in each year under variable costing?
b. Determine the net income each year under variable costing.
c. Reconcile the absorption costing and variable costing net income for each year.