During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ( $62 per unit) Cost of goods sold ( $39 per unit) Gross margin Selling and administrative expenses* Net operating income $3 per unit variable; $247,000 fixed each year. Year 1 Year 2 $930,000 $1,550,000 585,000 975,000 345,000 575,000 292,000 322,000 $ 53,000 $253,000 The company's $39 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead + Fixed manufacturing overhead ($380,000 20,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: $ 7 10 3 19 $ 39 Units produced Units sold Required: Year 1 Year 2 20,000 20,000 15,000 25,000 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.