During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $63 per unit) $ 1,197,000 $ 1,827,000 Cost of goods sold (@ $36 per unit) 684,000 1,044,000 Gross margin 513,000 783,000 Selling and administrative expenses* 310,000 340,000 Net operating income $ \203,000\ $ 443,000 * $3 per unit variable; $253,000 fixed each year. The companys $36 unit product cost is computed as follows: Direct materials $ 6 Direct labor 9 Variable manufacturing overhead 2 Fixed manufacturing overhead ($456,000 24,000 units) 19 Absorption costing unit product cost $ 36 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: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 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.