During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) Year 1 $ 1,240,000 680,000 Year 2 $ 1,860,000 Cost of goods sold (@ $34 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $253,000 fixed each year. 560,000 313,000 $ 247,000 The company's $34 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($275,000 + 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: 1,020,000 840,000 343,000 $ 497,000 $ 9 10 4 11 $ 34 Units produced Units sold Year 1 Year 2 25,000 20,000 25,000 30,000 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. Required 1 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product cost Required 1 Required 2 Required 3 What is the variable costing net operating income in Year 1 and in Year 2? Note: Loss amounts should be indicated with a minus sign. Year 1 Net operating income (loss) Required 1 Required 2 Required 3 Year 2 Reconcile the absorption costing and the variable costing net operating income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income Year 1 Year 2