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 (@ $38 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $255,000 fixed each year. Year 1 Year 2 $ 1,134,000 $ 1,764,000 684,000 1,064,000 450,000 700,000 309,000 339,000 $ 141,000 $ 361,000 The company's $38 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($437,000 23,000 units) Absorption costing unit product cost $ 8 8 3 19 $ 38 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold Required: 23,000 23,000 18,000 28,000 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.