Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods sold (@ $40 per unit) Selling and administrative expenses* Gross margin Year 1 $ 1,152,000 720,000 432,000 309,000 Year 2 $ 1,792,000 1,120,000 672,000 339,000 Net operating income $ 123,000 $ 333,000 * $3 per unit variable; $255,000 fixed each year. The company's $40 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($437,000 + 23,000 units) Absorption costing unit product cost $ 7 9 5 19 $ 40 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.