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 (42,000 units $40.60 per unit)	$ 1,705,200
Cost of goods sold (42,000 units $24 per unit)	1,008,000
Gross margin	697,200
Selling and administrative expenses	525,000
Net operating income	$ 172,200

The companys selling and administrative expenses consist of $315,000 per year in fixed expenses and $5 per unit sold in variable expenses. The $24 unit product cost given above is computed as follows:

Direct materials	$ 11
Direct labor	4
Variable manufacturing overhead	4
Fixed manufacturing overhead ($265,000 53,000 units)	5
Absorption costing unit product cost	$ 24

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.

Required 1.

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

Whitman Company
Variable Costing Income Statement

Required 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. (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