Net Incomes

Year Sales (@ $60 per unit) Cost of goods sold (@ $38 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $253,000 fixed each year. During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: 570, 950, 330, 550, 298, 328, $ 32,000 222, 1 Year $5 12 2 19 $ 38 2 $ 900,000 $ The company's $38 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($380, Absorption costing unit product cost 20,000 units) Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 20, 15, Year 2 20, 25, 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.