During Heaton Company's first two years of operations, it reported absorption costing net operating Income as follows: Year 1 Year 2 $1,680,000 Sales (@ $60 per unit) $ 1,080,000 980,000 Cost of goods sold (@$35 per unit) Gross margin 630,000 450,000 302,000 700,000 Selling and administrative expenses* 332,000 Net operating income $ 148,000 368,000 *$3 per unit variable; $248,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials $ 9 Direct labor 11 Variable manufacturing overhead 4 Fixed manufacturing overhead ($253,000 23,000 units) 11 Absorption costing unit product cost $ 35 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 operations are: Year 1 Year 2 23,000 23,000 Units produced Units sold 18,000 28,000 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. $