Problem 6-19 Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3 During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: ear ear Sales ( $62 per unit) Cost of goods sold ( $33 per unit) 1,116,000 Gross margin Selling and administrative expenses Net operating income 594,000 522,000 300,00330 1,736,000 924,000 812,000 1222,0001 $482,000 ces $3 per unit variable; $246,000 fixed each year The company's $33 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($253,00023,000 units) Absorption costing unit product cost s 10 s 33 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: ear Units produced Units sold 23,000 23,000 18,000 28,000