During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year1 $ 992,000 Year2 Sales ( $62 per unit) Cost of goods sold ( $35 per unit) Gross margin Selling and administrative expenses* Net operating income 1,612,000 910,000 702,000 300,000330,000 $ 372,000 560,000 432,00000 $ 132,000 " $3 per unit variable; $252,000 fixed each year. The company's $35 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($294,000 21,000 units) Absorption costing unit product cost 14 $ 35 Forty percent of fixed manufacturing overhead consists of wages and salaries, the remainder consists of depreciation charges on