Problem 6-19 (Algo) Variable Costing Income Statement; Reconciliation [LO,6-1, LO6-2, LO6-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods sold (@ $39 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $245,000 fixed each year. Year 1 $ 1,152,000 702,000 450,000 299,000 Year 2 $ 1,792,000 1,092,000 700,000 329,000 $ 151,000 $ 371,000 The company's $39 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($391,000 + 23,000 units) Absorption costing unit product cost $ 7 13 2 17 $ 39 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 23,000 23,000 Units sold 18,000 28,000 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. Check