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

Year $1$ Year $2$

Sales $($@ $$61$ per unit$)$ $ $1,098,000$ $ $1,708,000$

Cost of goods sold $($@ $$38$ per unit$)684,0001,064,000$

Gross margin $414,000644,000$

Selling and administrative expenses$*307,000337,000$

Net operating income $ $107,000$ $ $307,000$

$*$ $$3$ per unit variable; $$253,000$ fixed each year.

The company$$s $$38$ unit product cost is computed as follows:

Direct materials $ $8$

Direct labor $12$

Variable manufacturing overhead $2$

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

Absorption costing unit product cost $ $38$

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.