Problem $6-19($Algo$)$ Variable Costing Income Statement; Reconciliation $[$LO$,6-1,$ LO$6-2,$ LO$6-3]$

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

Year $1$ Year $2$

Sales $($@ $$62$ per unit$)$ $ $1,054,000$ $ $1,674,000$

Cost of goods sold $($@ $$31$ per unit$)527,000837,000$

Gross margin $527,000837,000$

Selling and administrative expenses$*303,000333,000$

Net operating income $ $224,000$ $ $504,000$

$*$ $$3$ per unit variable; $$252,000$ fixed each year.

The company$$s $$31$ unit product cost is computed as follows:

Direct materials $ $6$

Direct labor $10$

Variable manufacturing overhead $3$

Fixed manufacturing overhead $($$$264,000-$: $22,000$ units$)12$

Absorption costing unit product cost $ $31$

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

Year $1$ Year $2$

Units produced $22,00022,000$

Units sold $17,00027,000$

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.