During Heaton Company

$$

s first two years of operations, it reported absorption costing net operating income as follows:

Year

$1$

Year

$2$

Sales

$($

@ $

$2$

$5$

$$per unit

$)$

$

$1$

$,$

$0$

$0$

$0$

$,$

$0$

$0$

$0$

$

$1$

$,$

$2$

$5$

$0$

$,$

$0$

$0$

$0$

Cost of goods sold

$($

@ $

$1$

$8$

$$per unit

$)$

$$

$7$

$2$

$0$

$,$

$0$

$0$

$0$

$$

$9$

$0$

$0$

$,$

$0$

$0$

$0$

Gross margin

$2$

$8$

$0$

$,$

$0$

$0$

$0$

$3$

$5$

$0$

$,$

$0$

$0$

$0$

Selling and administrative expenses

$*$

$$

$2$

$1$

$0$

$,$

$0$

$0$

$0$

$$

$2$

$3$

$0$

$,$

$0$

$0$

$0$

Net operating income

$

$$

$7$

$0$

$,$

$0$

$0$

$0$

$

$$

$1$

$2$

$0$

$,$

$0$

$0$

$0$

$*$

$

$2$

$$per unit variable; $

$1$

$3$

$0$

$,$

$0$

$0$

$0$

$$fixed each year.

page

$2$

$8$

$6$

The company

$$

s $

$1$

$8$

$$unit product cost is computed as follows:

Direct materials

$

$$

$4$

Direct labor

$7$

Variable manufacturing overhead

$1$

Fixed manufacturing overhead

$($

$

$2$

$7$

$0$

$,$

$0$

$0$

$0$

$-$

:

$4$

$5$

$,$

$0$

$0$

$0$

$$units

$)$

$$

$6$

Absorption costing unit product cost

$

$1$

$8$

Production and cost data for the first two years of operations are:

Year

$1$

Year

$2$

Units produced

$4$

$5$

$,$

$0$

$0$

$0$

$4$

$5$

$,$

$0$

$0$

$0$

Units sold

$4$

$0$

$,$

$0$

$0$

$0$

$5$

$0$

$,$

$0$

$0$

$0$

Required:

Using variable costing, what is the unit product cost for both years?

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.?