During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ($62 per unit) Cost of goods sold ( $38 per unit) Gross margin Selling and administrative expenses Het operating income $3 per unit variable; $248,000 fixed each year. The company's $38 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($450,000 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $7 10 " 18 $ 38 Year 1 $1,240,000 760,000 480,000 308,000 $172,000 Units produced Units sold Required: Year 1 25,000 20,000 Year 2 25,000 30,000 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. Tear 2 $ 1,860,000 1,140,000 220,000 330,000 382,000