During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Year 1 Year 2 $ 1,080,000 666,000 $ 1,680,000 414,000 303,000 1,036,000 644,000 333,000 Net operating income * $3 per unit variable; $249,000 fixed each year. $ 111,000 $ 311,000 The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($299,000 23,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 7 12 5 13 $ 37 Units produced Units sold Required: Year 1 Year 2 23,000 23,000 18,000 28,000 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.