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* 311, 000 341, 000 65:53 Net operating income $ 126, 000 $ 326, 000 * $3 per unit variable; $254,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials $ 9 Direct labor 10 Variable manufacturing overhead 2 Fixed manufacturing overhead ($456, 000 : 24, 000 units) 19 ices Absorption costing unit product cost $ 40 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. 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.