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 (e $40 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable; $249,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials. Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($475,000 25,000 units) Absorption costing unit product cost $ 7 12 2 19 $ 40 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 25,000 25,000 Units sold 20,000 30,000 Year 1 $ 1,260,000 800,000 460,000 309,000 $ 151,000 Year 2 $ 1,890,000 1,200,000 690,000 339,000 $ 351,000 Required: 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.