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 (@ $39 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 992,000 624,000 368,000 295,000 Year 2 $ 1,612,000 1,014,000 598,000 325,000 $ 73,000 $ 273,000 * * $3 per unit variable; $247,000 fixed each year. The company's $39 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($294,000 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 Units produced 21,000 Units sold 16,000 Year 2 21,000 26,000 Required: $ 10 10 5 14 $ 39 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.