During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: $ Sales (@ $64 per unit) Cost of goods sold (@ $34 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 960, eee 510, eee 450,000 297,000 153,000 Year 2 $ 1,600,000 850,000 750,000 327, eee $ 423,000 *$3 per unit variable: $252,000 fixed each year. The company's $34 unit product cost is computed as follows: 7 11 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($240,000 - 20,000 units) Absorption costing unit product cost 12 $ 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 1 20,000 15,000 Year 2 20,000 25,000 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