During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $38 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,037,000 646,000 391,000 306,000 $ 85,000 Year 2 $ 1,647,000 1,026,000 621,000 336,000 $ 285,000 * $3 per unit variable; $255,000 fixed each year. The company's $38 unit product cost is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($374,000 + 22,000 units) Absorption costing unit product cost B 11 2 17 $ 38 Production and cost data for the first two years of operations are: Units produced Units sold Year 1 22,000 17,000 Year 2 22,000 27,000 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. Required 1 Required 2 Required 3 Using variable costing, what is the unit product cost for both years? Unit product cost $ 21 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) $ (424,000) 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 Year 2 Variable costing net operating income (loss) $ 114,000 $ 484,000 Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing 60,000 (60,000) Absorption costing net operating income $ 174,000 $ 424,000