During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ( $63 per unit) Cost of goods sold ( $30 per unit) Gross margin Selling and administrative expenses* Net operating income $ 1,008,000 $1,638,000 480,000 Year 1 Year 2 780,000 528,000 858,000 293,000 323,000 $ 235,000 $ 535,000 *$3 per unit variable; $245,000 fixed each year. The company's $30 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($273,000 +21,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 Year 2 21,000. 21,000 16,000 26,000 2 13 $ 30 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 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Year 1 Year 2 Net operating income (loss) Required 1 Required 2 Required 3 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 Year 1 Year 2 Variable costing net operating income (loss) Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income