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 (@ $33 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $252,000 fixed each year. $ 1,008,000 $1,638,000 Year 1 Year 2 528,000 858,000 480,000 780,000 300,000 330,000 $ 180,000 $450,000 The company's $33 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($336,000+21,000 units). Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 7 8 2 16 $ 33 Units produced Units sold Required: Year 1 Year 2 21,000 16,000 21,000 26,000 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.