Sales (@ $62 per unit) $ 992,000 $ 1,612,000 Cost of goods sold (@ $41 per unit) 656,000 1,066,000 Gross margin 336,000 546,000 Selling and administrative expenses* 297,000 327,000 Net operating income $ 39,000 $ 219,000 * $3 per unit variable; $249,000 fixed each year. The companys $41 unit product cost is computed as follows: Direct materials $ 6 Direct labor 11 Variable manufacturing overhead 5 Fixed manufacturing overhead ($399,000 21,000 units) 19 Absorption costing unit product cost $ 41 Forty percent of fixed manufacturing overhead consists of wages 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: Year 1 Year 2 Units produced 21,000 21,000 Units sold 16,000 26,000 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.