During heaton company’s first two years of operations, it reported absorption costing net operating income as follows: year 1 year 2 sales (@ $63 per unit) $ 1,134,000 $ 1,764,000 cost of goods sold (@ $31 per unit) 558,000 868,000 gross margin 576,000 896,000 selling and administrative expenses* 308,000 338,000 net operating income $ 376,000 726,000 * $3 per unit variable; $254,000 fixed each year. the company’s $31 unit product cost is computed as follows: direct materials $ 7 direct labor 9 variable manufacturing overhead 2 fixed manufacturing overhead ($299,000 ÷ 23,000 units) 13 absorption costing unit product cost $ 31 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: 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.