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Problem 6-19 Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows Year 1 Year 2 Sales ( $63 per unit) Cost of goods sold ( $42 per unit) Gross margin Selling and administrative expenses* Net operating income 1,260,000 1,890,000 840,000260 000 630,000 311,00000 420,000 341,000 $ 289,000 $ 109,000 $3 per unit variable; $251,000 fixed each year. The company's $42 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($450,000 25,000 units) Absorption costing unit product cost 10 18 $ 42 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges orn production equipment and buildings. Production and cost data for the first two years of operations are Units produced Units sold Year 1 Year 2 25,000 25,000 20,000 30,000 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