During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ($63 per unit) Cost of goods sold (@ $40 per unit) Year 1 $ 1,008,000 640,000 Year 2 $ 1,638,000 1,040,000 Gross margin Selling and administrative expenses Net operating income $3 per unit variable; $246,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead. ces Fixed manufacturing overhead ($399,000+21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 8 9 4 19 $ 40 368,000 294,000 $ 74,000 598,000 324,000 $ 274,000 Units produced Units sold Required: Year 1 Year 2 21,000 21,000 16,000 26,000 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. Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory Absorption costing net operating income Year 1 Year 2