7-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,7-1, L07-2, L07-3] 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 (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $250,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($294,000 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 Year 2 21,000 16,000 21,000 26,000 $ 7 12 2 14 $ 35 Year 1 $ 960,000 560,000 400,000 Year 2 $ 1,560,000 910,000 650,000 298,000 328,000 $ 102,000 $ 322,000 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product cost Required 1 Required 2 Required 3 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Net operating income (loss) Year 1 Year 2 Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory Absorption costing net operating income