During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: 1,098,000 1,708,000 6660001,036,000 Sales ( $61 per unit) Cost of gooda sold ( $37 per unit) Gross margin Selling and adminiatrative expenses* Net operating income 672,000 303,000 333,000 1129, 000 339,000 432, 000 $3 per unit variable; $249,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($322,000 23,000 units) Absorption coating unit product cost 14 37 orty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on roduction equipment and buildings. roduction and cost data for the first two years of operations are: Unita pzoduced Units sold Year 1 Year 2 23, 000 23,000 18, 00028, 000 Prev1 of 4 lNext >