cam#2.pdf Variable Costing(15 points) Vernon Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below Sales (35,000 units x $25 per unit) Cost of goods sold (35,000 units x $16 per unit) Gross margin Selling and administration expenses Net operating income $875,000 560,000 315,000 280.000 S 35,000 The company's selling and administrative expenses consist of $210,000 per year in fixed expenses and $2 per unit sold in variable expenses. The $16 per unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($160,000/40,000 units produced S5 S6 $1 S4 Absorption costing unit product cost 1. Prepare a contribution format income statement using variable costing. Sales $16 Variable expenses: Variable cost of goods sold Variable selling and administrative expenses Fxed expenses: Flxed manufacturing overhead... Fixed selling and administrative expenses... Net operating income... PAGE 27