During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales @ $62 per unit) Cost of goods sold (@ $38 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 $ 1,054,000 646,000 408,000 297,000 $ 111,000 Year 2 $ 1,674,000 1,026,000 648,000 327,000 $ 321,000 *$3 per unit variable: $246,000 fixed each year. The company's $38 unit product cost is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($308,000 = 22,000 units) Absorption costing unit product cost 7 12 5 14 $ 38 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 1 22,000 17,000 Year 2 22,000 27,000 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. Complete this question by entering your answers in the tabs below. 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 Year 2 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) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Less: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing net operating income