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 (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $252,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($280,000 20,000 units) Absorption costing unit product cost $ 7 11 5 14 $ 37 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 20,000 20,000 Units sold 15,000 25,000 Required: Year 1 $ 915,000 555,000 Year 2 $ 1,525,000 925,000 360,000 600,000 297,000 327,000 $ 63,000 $ 273,000 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.