During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$60 per unit) Cost of goods sold (@ $33 per unit) Gross margin Selling and administrative expenses* Year 1 $ 960,000 528,000 432,000 303,000 Year 2 $ 1,560,000 858,000 702,000 333,000 Net operating income $ 129,000 $ 369,000 * $3 per unit variable; $255,000 fixed each year. * The company's $33 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($357,000 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: 1 769 $ 6 17 $ 33 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.