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) Cost of goods sold ( $39 per unit) Gross margin Selling and administrative expenses* Net operating income $ 976,000 1,586,000 1,014,000 572,000 329,000 $ 153,0001243,000 624,000 352,000 299,000 * $3 per unit variable; $251,000 fixed each year. The company's $39 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($336,000 Absorption costing unit product cost 12 21,000 units) 16 $ 39 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 Year 2 21,000 21,000 16,000 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 1Required 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) K Required 1 Required 3> Required 1Required 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 Year 2 Variable costing net operating income (loss) Absorption costing net operating income K Required 2 Required3 Required 1Required 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 Year 2 Variable costing net operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Add: Fixed manufacturing overhead cost released from inventory under absorption costing Less: Fixed manufacturing overhead cost deferred in inventory under absorption costing Less: Fixed manufacturing overhead cost released from inventory under absorption costing