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During Heaton Companys first two years of operations, it reported absorption costing net operating income...

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Accounting

During Heaton Companys first two years of operations, it reported absorption costing net operating income as follows:
Year 1 Year 2
Sales (@ $61 per unit) $ 1,037,000 $ 1,647,000
Cost of goods sold (@ $35 per unit)595,000945,000
Gross margin 442,000702,000
Selling and administrative expenses*301,000331,000
Net operating income $ 141,000 $ 371,000
* $3 per unit variable; $250,000 fixed each year.
The companys $35 unit product cost is computed as follows:
Direct materials $ 10
Direct labor 10
Variable manufacturing overhead 1
Fixed manufacturing overhead ($308,000-: 22,000 units)14
Absorption costing unit product cost $ 35
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.

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