Problem 6-19 Variable Costing Income Statement; Reconciliation (LO6-2, L06-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $41 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,098,000 738,000 360,000 305,000 $ 155,000 Year 2 $1,708,000 1,148,000 560,000 335,000 $ 225,000 * $3 per unit variable; $251,000 fixed each year. The company's $41 unit product cost is computed as follows: $ 8 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($414,000 + 23,000 units) Absorption costing unit product cost Problem 6-19 Variable Costing Income Statement; Reconciliation (LO6-2, L06-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $61 per unit) Cost of goods sold (@ $41 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $1,098,000 738,000 360,000 305,000 $ 155,000 Year 2 $1,708,000 1,148,000 560,000 335,000 $ 225,000 * $3 per unit variable; $251,000 fixed each year. The company's $41 unit product cost is computed as follows: $ 8 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($414,000 + 23,000 units) Absorption costing unit product cost