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 $ 1,098,000 684,000 414,000 307,000 $ \107,000 Year 2 $ 1,708,000 1,064,000 644,000 337,000 $ 307,000 *$3 per unit variable; $253,000 fixed each year. The company's $38 unit product cost is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($414,000 + 23,000 units) Absorption costing unit product cost 5 10 5 $ 38 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: Units produced Units sold Year 1 23,000 18,000 Year 2 23,000 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