1 1 During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: 15 points Sales (@ $64 per unit) Cost of goods sold (@ $30 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,152,000 540,000 612,000 305,000 $ 307,000 Year 2 $ 1,792,000 840,000 952,000 335,000 $ 617,000 Skipped * $3 per unit variable; $251,000 fixed each year. eBook The company's $30 unit product cost is computed as follows: Print Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($276,000 = 23,000 units) Absorption costing unit product cost $ 5 10 3 12 $ 30 References 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 first two years of operations are: Units produced Units sold Year 1 23,000 18,000 Year 2 23,000 28,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year