During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Cost of goods seod (e 537 per unt) Sales ( $62 per unit) $1,054, 000 1,674,000 999,000 675, 000 331,000 1124,0001 344,000 629.000 nts Gross margin Selling and administrative expenses Net operating income 425,000 301,000 eBook Print $3 per unit variable; $250,000 fixed each year. The company's $37 unit product cost is computed as follows eferences$ Direct materials Direet labor Variable manufacturing overhead Fixed manufacturing overhead ($352,000 22,000 unita) Absorption costing unit product cost 10 16 $ 37