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 $(38,000$ units $\backslash$times $$45\mathrm{.}10$ per unit$)$ $ $1,713,800$

Cost of goods sold $(38,000$ units $\backslash$times $$21$ per unit$)798,000$

Gross margin $915,800$

Selling and administrative expenses $437,000$

Net operating income $ $478,800$

The company$$s selling and administrative expenses consist of $$285,000$ per year in fixed expenses and $$4$ per unit sold in variable expenses. The $$21$ unit product cost given above is computed as follows:

Direct materials $ $10$

Direct labor $3$

Variable manufacturing overhead $3$

Fixed manufacturing overhead $($$$235,000-$: $47,000$ units$)5$

Absorption costing unit product cost $ $21$

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.