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 ($31 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $252,000 fixed each year. $ 1,220,000 $1,830,000 620,000 Year 1 Year 2 930,000 900,000 312,000 342,000 $ 288,000 $ 558,000 600,000 The company's $31 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($350,000 + 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 7 8 2 14 $ 31 Units produced Units sold Required: Year 1 Year 2 25,000 25,000 20,000 30,000 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.