Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Whitman Comn ement Sales (38,000 units x $42.10 per unit) Cost of goods sold (38,000 unitsx $23 per unit) Gross margin Selling and administrative expenses 1,599,800 874,000 725,800 437.000 Net operating income 288.800 The company's selling and administrative expenses consist of $285,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 per unit product cost given above computed as follows: Direct materials $ 12 Direct labor 3 Variable manufacturing overhead Fixed manufacturing overhead (S245,000 49,000 units) 5 $ 23 Absorption costing unit product cost Required: 1. Prepare the company's income statement in the contribution format using variable costing. Whitman Company Variable Costing Income Statement Sales $ 1,599,800 Variable expenses: Indirect materials 456,000 Indirect labor 114,000 Fixed manufacturing overhead 114,000 Variable selling and administrative expenses 836,000 152,000 763,800 Fixed expenses: Fixed manufacturing overhead 245,000 Fixed selling and administrative expenses 285,000 530,000 Net operating income 233,800 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. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes (losses) Variable costing net operating income (loss) Absorption costing net operating income (loss)