During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 2 Sales (@$62 per unit) Cost of goods sold (@ $29 per unit) Gross margin Selling and administrative expenses* Year 1 $ 1,240,000 580,000 $ 1,860,000 870,000 660,000 990,000 308,000 338,000 $ 352,000 $ 652,000 Net operating income *$3 per unit variable; $248,000 fixed each year. The company's $29 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($325,000 + 25,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Year 1 Year 2 25,000 25,000 20,000 30,000 $ 5 9 2 13 $ 29 Units sold 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.