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) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,197,000 Year 2 $ 1,827,000 646,000 986,000 551,000 841,000 309,000 339,000 $ 242,000 $ 502,000 * $3 per unit variable; $252,000 fixed each year. The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($432,000 24,000 units) Absorption costing unit product cost $ 5 10 1 18 $ 34 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Units produced Units sold Year 1 24,000 Year 2 24,000 19,000 29,000 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.