During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ($62 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $251,000 fixed each year. Year 1 Year 2 $ 992,000 $ 1,612,000 592,000 400,000 299,000 962,000 650,000 329,000 $ 101,000 $ 321,000 The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($294,000 + 21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 9 10 4 14 $ 37 Units produced Units sold Required: Year 1 21,000 16,000 Year 2 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.