During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year 1 Year 2 Sales (e $63 per unit) Cost of goods sold ( $33 per unit) Gross margin Selling and administrative expenses* Net operating income 1,071,0001,701,000 561,000 891,000 810,000 510,000 303,000 3535000- $1207,000 477,000 $3 per unit variable: $252,000 fixed each year The company's $33 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($264,000 22,000 units) Absorption costing unit product cost 12 12 S 33 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 operatons are