During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $63 per unit) $ 1,071,000 $ 1,701,000 Cost of goods sold (@ $35 per unit) 595,000 945,000 Gross margin 476,000 756,000 Selling and administrative expenses*Footnote asterisk 305,000 335,000 Net operating income $ 171,000 $ 421,000 *Footnote asterisk $3 per unit variable; $254,000 fixed each year. The companys $35 unit product cost is computed as follows: Direct materials $ 8 Direct labor 8 Variable manufacturing overhead 5 Fixed manufacturing overhead ($308,000 22,000 units) 14 Absorption costing unit product cost $ 35 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 22,000 22,000 Units sold 17,000 27,000

Required:

Using variable costing, what is the unit product cost for both years?

What is the variable costing net operating income in Year 1 and in Year 2?

Reconcile the absorption costing and the variable costing net operating income figures for each year.