Joseph Company has just completed its first year of operations. The companys absorption costing income statement for the year appears below:

Joseph Company Income Statement

sales (35000 units * 25 dollars per unit)	875,0000
cost of goods sold ( 35,000 units * 16 dollars per units)	560,000
gross margin	315,00
selling and administrative expensess	280,000
net operating income	$35,000

The companys 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	$5
direct labor	6
variable manufacturing overhead	1
Fixed manufacturing overhead ( $160,000 / 40,000 units)	4
absorption costing unit product cost	$16

Instructions: a. Redo the companys income statement in the contribution format using variable costing.