5 value: 1.00 points During Heaton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 1 760,000 399,000 Year 2 Sales ( $61 per unit) Cost of goods sold (@ $40 per unit) $1,159,000 1,769,000 1,160,000 Gross margin Selling and administrative expenses* 609,000 353,000 323,000 Net operating income $ 76,000 S 256,000 $3 per unit variable; $266,000 fixed each year The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($408,000 24,000 units) 12 4 17 Absorption costing unit product cost $ 40 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 two years are: Units produced Units sold Year 1Year 2 24,000 19,000 29,000 24,000