uring Heaton Company$$s first two years of operations, it reported absorption costing net operating income as follows:

Year $1$ Year $2$

Sales $($@ $$64$ per unit$)$ $ $1,280,000$ $ $1,920,000$

Cost of goods sold $($@ $$37$ per unit$)740,0001,110,000$

Gross margin $540,000810,000$

Selling and administrative expenses$*308,000338,000$

Net operating income $ $232,000$ $ $472,000$

$*$ $$3$ per unit variable; $$248,000$ fixed each year.

The company$$s $$37$ unit product cost is computed as follows:

Direct materials $ $9$

Direct labor $12$

Variable manufacturing overhead $4$

Fixed manufacturing overhead $($$$300,000-$: $25,000$ units$)12$

Absorption costing unit product cost $ $37$

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

Year $1$ Year $2$

Units produced $25,00025,000$

Units sold $20,00030,000$

Required:

Using variable costing, what is the unit product cost for both years?

What is the variable costing net operating income in Year $1$ and in Year $2?$

Reconcile the absorption costing and the variable costing net operating income figures for each year.