During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $62 per unit) Cost of goods sold (@ $41 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $251,000 fixed each year. $ 992,000 $ 1,612,000 656,000 336,000 299,000 1,066,000 546,000 329,000 $ 37,000 $ 217,000 The company's $41 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($399,000 21,000 units) Absorption costing unit product cost $ 6 13 3 19 $ 41 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold 21,000 21,000 16,000 26,000 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.