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 (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 Year 2 $ 1,159,000 $1,769,000 665,000 1,015,000 754,000 494,000 306,000 336,000 $ 188,000 $ 418,000 * $3 per unit variable; $249,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($312,000 24,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 7 11 4 13 $ 35 Units produced Units sold Required: Year 1 Year 2 24,000 24,000 19,000 29,000 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.