Sales $($@ $$61$ per unit$)$ $ $1,037,000$ $ $1,647,000$

Cost of goods sold $($@ $$36$ per unit$)612,000972,000$

Gross margin $425,000675,000$

Selling and administrative expenses$*297,000327,000$

Net operating income $ $128,000$ $ $348,000$

$*$ $$3$ per unit variable; $$246,000$ fixed each year.

The company$$s $$36$ unit product cost is computed as follows:

Direct materials $ $6$

Direct labor $9$

Variable manufacturing overhead $4$

Fixed manufacturing overhead $($$$374,000-$: $22,000$ units$)17$

Absorption costing unit product cost $ $36$

Production and cost data for the first two years of operations are:

Year $1$ Year $2$

Units produced $22,00022,000$

Units sold $17,00027,000$

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.