Sales (@ $62 per unit) Cost of goods sold (@ $37 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,178,000 703,000 475,000 312,000 $ \163,000 Year 2 $1,798,000 1,073,000 725,000 342,000 $ 383,000 *$3 per unit variable; $255,000 fixed each year. The company's $37 unit product cost is computed as follows: $ 10 11 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($288,000 + 24,000 units) Absorption costing unit product cost 12 $ 37 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 operatons are: Units produced Units sold Year 1 24,000 19,000 Year 2 24,000 29,000 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