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

Whitman Company

Income Statement

Sales $(39,000$ units $\backslash$times $$41\mathrm{.}10$ per unit$)$ $ $1,602,900$

Cost of goods sold $(39,000$ units $\backslash$times $$25$ per unit$)975,000$

Gross margin $627,900$

Selling and administrative expenses $448,500$

Net operating income $ $179,400$

The company$$s selling and administrative expenses consist of $$292,500$ per year in fixed expenses and $$4$ per unit sold in variable expenses. The $$25$ unit product cost given above is computed as follows:

Direct materials $ $12$

Direct labor $5$

Variable manufacturing overhead $3$

Fixed manufacturing overhead $($$$270,000-$: $54,000$ units$)5$

Absorption costing unit product cost $ $25$

Required:

$1.$ Redo the company$$s 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.