Year 1 $ 1,037,000 Year 2 Sales ( $61 per unit) Cost of goods sold ( $38 per unit) Gross margin Selling and administrative expenses* Net operating income $ 1,647,000 621,000 s 189,000 289,000 646,000102010 391,000 302,000332,000 *$3 per unit variable; $251,000 fixed each year The company's $38 unit product cost is computed as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($418,000 Absorption costing unit product cost 22,000 units) 19 $ 38 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 Units produced Units sold Year 1 Year 2 22,000 22,000 17,000 27,000 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