The companys $39 unit product cost is computed as follows:

Direct materials	$ 8
Direct labor	10
Variable manufacturing overhead	4
Fixed manufacturing overhead ($357,000 21,000 units)	17
Absorption costing unit product cost	$ 39

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.