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In: AccountingDuring Heaton Company’s first two years of operations, itreported absorption costing net operating income as...During Heaton Company’s first two years of operations, itreported absorption costing net operating income as follows:Year 1Year 2Sales (@ $61 per unit)$915,000$1,525,000Cost of goods sold (@ $31 per unit)465,000775,000Gross margin450,000750,000Selling and administrative expenses*294,000324,000Net operating income$156,000$426,000* $3 per unit variable; $249,000 fixed each year.The company’s $31 unit product cost is computed as follows:Direct materials$6Direct labor8Variable manufacturing overhead3Fixed manufacturing overhead ($280,000 ÷ 20,000 units)14Absorption costing unit product cost$31Forty percent of fixed manufacturing overhead consists of wagesand salaries; the remainder consists of depreciation charges onproduction equipment and buildings.Production and cost data for the first two years of operationsare:Year 1Year 2Units produced20,00020,000Units sold15,00025,000Required:1. Using variable costing, what is the unit product cost forboth years?2. What is the variable costing net operating income in Year 1and in Year 2?3. Reconcile the absorption costing and the variable costing netoperating income figures for each year.