During Heaton Company's first two years of operations, it reported absorption costing net operating income as follow Sales (@ $62 per unit) Cost of goods sold (@ $28 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 Year 2 $ 1,240,000 $ 1,860,000 560,000 840,000 680,000 1,020,000 314,000 344,000 $ 366,000 $ 676,000 * $3 per unit variable; $254,000 fixed each year. The company's $28 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($275,000 + 25,000 units) Absorption costing unit product cost $ 7 9 1 11 $ 28 Production and cost data for the first two years of operations are: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000 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