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 $(41,000$ units $\backslash$times $$45\mathrm{.}10$ per unit$)$ $ $1,849,100$

Cost of goods sold $(41,000$ units $\backslash$times $$23$ per unit$)943,000$

Gross margin $906,100$

Selling and administrative expenses $512,500$

Net operating income $ $393,600$

The company$$s selling and administrative expenses consist of $$307,500$ per year in fixed expenses and $$5$ per unit sold in variable expenses. The $$23$ unit product cost given above is computed as follows:

Direct materials $ $9$

Direct labor $4$

Variable manufacturing overhead $4$

Fixed manufacturing overhead $($$$300,000-$: $50,000$ units$)6$

Absorption costing unit product cost $ $23$

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.