During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $62 per unit) Cost of goods sold (@ $31 per unit) Gross margin Selling and administrative expenses* Net operating income *$3 per unit variable; $253,000 fixed each year. The company's $31 unit product cost is computed as follows: Year 1 Year 2 $ 1,054,000 $1,674,000 527,000 527,000 304,000 $ 223,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($264,000 + 22,000 units) Absorption costing unit product cost 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 27,000 837,000 837,000 334,000 $ 503,000 $6 10 3 12 $ 31 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.

- $3 per unit variable; $253,000 fixed each year. The company's $31 unit product cost is computed as follows: Production and cost data for the first two years of operations are: 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