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 (@ $34 per unit) Year 1 $ 1,197,000 646,000 Year 2 $ 1,827,000 986,000 Gross margin 551,000 841,000 Selling and administrative expenses* 304,000 334,000 Net operating income $ 247,000 $ 507,000 * $3 per unit variable; $247,000 fixed each year. The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($264,000 24,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Year 1 Year 2 24,000 19,000 24,000 29,000 $ 6 13 4 11 $ 34 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.