Vernon Company has just completed its finst year of operations. The company's absorption costing inconse statement for the year appears below Sales (35,000 units x $25 per unit) $875,000 315,000 35,000 Cost of goods sold (35,000 units x $16 per unit)560.000 Gross margin Selling and administration expenses Net operating income There was no beginning finished goods inventory. The company's selling and administrative sst o3210,000 per year in fixed expenses and $2 per unit sold in variable The $16 per unit product cost given above is computed as follows: Direct materials Direct labor $6 Fixed manufacturing overhead ($160,000 40,000 units produced S1 94 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 Contribution margin Fixed expenses: Fixed manufacturing overhead.. Fixed selling and administrative expenses.... Net operating income... 2. Reconcile (using numbers) and explain (using words) the difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement