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

Year $1$ Year $2$

Sales $($@ $$62$ per unit$)$ $ $1,116,000$ $ $1,736,000$

Cost of goods sold $($@ $$35$ per unit$)630,000980,000$

Gross margin $486,000756,000$

Selling and administrative expenses$*300,000330,000$

Net operating income $ $186,000$ $ $426,000$

$*$ $$3$ per unit variable; $$246,000$ fixed each year.

The company$$s $$35$ unit product cost is computed as follows:

Direct materials $ $9$

Direct labor $9$

Variable manufacturing overhead $1$

Fixed manufacturing overhead $($$$368,000-$: $23,000$ units$)16$

Absorption costing unit product cost $ $35$

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

Year $1$ Year $2$

Units produced $23,00023,000$

Units sold $18,00028,000$

Required:

$1.$ 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.