During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 $ 1,134,000 $1,764,000 1,064,000 684,000 450,000 309,000 700,000 339,000 $ 141,000 $361,000 Sales (@ $63 per unit) Cost of goods sold (@ $38 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $255,000 fixed each year. The company's $38 unit product cost is computed as follows: Direct materials. Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($437,000 23,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Year 1 23,000 18,000 Units produced Units sold Year 2 23,000 28,000 $8 || 19 $38 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.