During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales @ $63 per unit) Cost of goods sold (@ $34 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $ 1,008,000 544,000 464,000 297,000 $ 167,000 Year 2 $ 1,638,000 884,000 754,000 327,000 $ 427,000 *$3 per unit variable: $249,000 fixed each year. The company's $34 unit product cost is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($315,000 = 21,000 units) Absorption costing unit product cost 7 9 3 $ 34 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Units produced Units sold Year 21,000 16,000 Year 2 21,000 26,000 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. Required 1 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product cost Required 1 Required 2 Required 3 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Year 1 Year 2 Net operating income (loss) Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Year 2 Absorption costing net operating income