During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ($25 per unit) Cost of goods sold ( $18 per unit). Gross margin Selling and administrative expenses* Net operating income. *$2 per unit variable; $130,000 fixed each year. Year 1 Year 2 $1,000,000 $1,250,000 720,000 900,000 280,000 350,000 210,000 230,000 $ 70,000 $ 120,000 The company's $18 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($270,000 45,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 18 Units produced Units sold. Required: Year 1 Year 2 45,000 45,000 40,000 50,000 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