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

	Year 1			Year 2
Sales (@ $60 per unit)	$	1,200,000		$	1,800,000
Cost of goods sold (@ $42 per unit)		840,000			1,260,000
Gross margin		360,000			540,000
Selling and administrative expenses*		315,000			345,000
Net operating income	$	45,000		$	195,000

* $3 per unit variable; $255,000 fixed each year.

The companys $42 unit product cost is computed as follows:

Direct materials	$	10
Direct labor		10
Variable manufacturing overhead		2
Fixed manufacturing overhead ($500,000 25,000 units)		20
Absorption costing unit product cost	$	42

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

	Year 1	Year 2
Units produced	25,000	25,000
Units sold	20,000	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.

During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $60 per unit) Cost of goods sold (@ $42 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 1,200,000 840,000 360,000 315,000 Year 2 $ 1,800,000 1,260,000 540,000 345,000 $ 195,000 $ 45,000 * $3 per unit variable; $255,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($500,000 - 25,000 units) Absorption costing unit product cost $ 10 10 2 20 42 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: En. 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 cost Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the variable costing net operating income in Year 1 and in Year 2? (Loss amounts should be indicated with a minus sign.) Year 1 Year 2 Net operating income (loss) Complete this question by entering your answers in the tabs below. 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 Variable costing net operating income (loss) Year 2 Absorption costing net operating income