3:44:01 ook int ences During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods sold (@ $46 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable; $249,000 fixed each year. Year 2 $ 1,740,000 1,334,000 Year 1 $ 1,140,000 874,000 266,000 306,000 $ -40,000 $ 70,000 The company's $46 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($480,000 + 24,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 406,000 336,000 $9 13 4 20 $ 46.