During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Year 1 $ 915,000 Year 2 $ 1,525,000 555,000 925,000 360,000 299,000 600,000 329,000 $ 61,000 $ 271,000 Net operating income * $3 per unit variable; $254,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000 20,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 Year 2 20,000 15,000 20,000 25,000 $ 6 11 2 18 $ 37 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.