During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows:

	Year 1	Year 2
Sales (@ $63 per unit)	$ 1,197,000	$ 1,827,000
Cost of goods sold (@ $40 per unit)	760,000	1,160,000
Gross margin	437,000	667,000
Selling and administrative expenses*	305,000	335,000
Net operating income	$ 132,000	$ 332,000

* $3 per unit variable; $248,000 fixed each year.

The company's $40 unit product cost is computed as follows:

Direct materials	$ 9
Direct labor	13
Variable manufacturing overhead	2
Fixed manufacturing overhead ($384,000 24,000 units)	16
Absorption costing unit product cost	$ 40

Production and cost data for the first two years of operations are:

	Year 1	Year 2
Units produced	24,000	24,000
Units sold	19,000	29,000

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.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product costWhat is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) 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