During Heaton Company's first two years of operations, it reported absorption costing net operating Income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $42 per unit) Gross margin Selling and administrative expenses* Year 2 $ 1,708,000 1,176,000 Year 1 $ 1,098,000 756,000 342,000 307,000 $ 35,000 $ 195,000 532,000 337,000 Net operating income * $3 per unit variable; $253,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($414,000 23,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 8 13 3 18 $ 42 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.