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

Year $1$ Year $2$

Sales $($@ $$25$ per unit$)$ $ $1,000,000$ $ $1,250,000$

Cost of goods sold $($@ $$18$ per unit$)720,000900,000$

Gross margin $280,000350,000$

Selling and administrative expenses$*210,000230,000$

Net operating income $ $70,000$ $ $120,000$

$*$$$2$ per unit variable; $$130,000$ fixed each year.

The company$$s $$18$ unit product cost is computed as follows:

Direct materials $ $4$

Direct labor $7$

Variable manufacturing overhead $1$

Fixed manufacturing overhead $($$$270,000-$: $45,000$ units$)6$

Absorption costing unit product cost $ $18$

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

Year $1$ Year $2$

Units produced $45,00045,000$

Units sold $40,00050,000$

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 $2?$

Reconcile the absorption costing and the variable costing net operating income figures for each year.