Problem 4-19 (Algo) Variable Costing Income Statement; Reconciliation [LO4-2, L04-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $53 per unit) $ 1,134,000 $ 1,764,000 Cost of goods sold (@ $31 per unit) 558,000 868,000 Gross margin 576,000 396,000 Selling and administrative expenses: 309,000 339,000 Net operating income $ 257.330 $ 5535'\" \" $3 per unit variable; $255,000 fixed each year. The company's $31 unit product cost is computed as follows: Direct materials :5 7 Direct labor 11 Variable manufacturing overhead 2 Fixed manufacturing overhead ($253,000 + 23,000 units) 11 Absorption costing unit product cost $ 31 Forty percent of xed manufacturing overhead consists ofwages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 23,000 23,000 Units sold 18,000 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Year 1 Year 2 Net operating income under Variable Costing S 212,000 S 612,000 Fixed manufacturing overhead deferred in inventory ($11 x 5000 units) 55,000 Fixed manufacturing overhead released from inventory ($11 x 5000 units) 0 55,000 Net operating income under Absorption Costing $ 267,000 $ 557,000