Whitman Company has just completed its first year of operations. The companys absorption costing income statement for the year follows:

Whitman Company Income Statement
Sales (41,000 units $44.60 per unit)	$	1,828,600
Cost of goods sold (41,000 units $20 per unit)		820,000
Gross margin		1,008,600
Selling and administrative expenses		471,500
Net operating income	$	537,100

The companys selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $20 unit product cost given above is computed as follows:

Direct materials	$	9
Direct labor		3
Variable manufacturing overhead		3
Fixed manufacturing overhead ($250,000 50,000 units)		5
Absorption costing unit product cost	$	20

Required:

1. Redo the companys income statement in the contribution format using variable costing.

2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.

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

Whitman Company
Variable Costing Income Statement
		0
		0
		0
		$0

Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above. (Enter any losses or deductions as a negative value.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Variable costing net operating income
Absorption costing net operating income