During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $31 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,220,000 620,000 600,000 313,000 $ 287,000 Year 2 $ 1,830,000 930,000 900,000 343,000 557,000 *$3 per unit variable; $253,000 fixed each year. The company's $31 unit product cost is computed as follows: 5 3 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($350,000 + 25,000 units) Absorption costing unit product cost 14 $ 31 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 25,000 20,000 Year 2 25,000 30,000 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