During Denton Company 's first two years of operations, the company reported absorption costing net operating income as follows:

Year 1 Year 2 Sales (@ $50 per unit) . . . . . $1,000,000 $1,500,000 Cost of goods sold (@ $34 per unit) . . . . . . 680,000 1,020,000 Gross margin . . . . . . 320,000 480,000 Selling and administrative expenses*. 310,000 340,000 Net operating income . .. $ 10,000 $ 140,000 *$3 per unit variable; $250,000 fixed each year.Direct materials . . $ 8 Direct labor . . . . 10 Variable manufacturing overhead . . . .. 2 Fixed manufacturing overhead ($350,000 : 25,000 units) 14 . . . . Absorption costing unit product cost . . . . $34