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 $(35,000$ units $\backslash$times $$25$ per unit$)$ $ $875,000$

Cost of goods sold $(35,000$ units $\backslash$times $$16$ per unit$)560,000$

Gross margin $315,000$

Selling and administrative expenses $280,000$

Net operating income $ $35,000$

The company$$s selling and administrative expenses consist of $$210,000$ per year in fixed expenses and $$2$ per unit sold in variable expenses. The $$16$ unit product cost given above is computed as follows:

Direct materials $ $5$

Direct labor $6$

Variable manufacturing overhead $1$

Fixed manufacturing overhead $($$$160,000-$: $40,000$ units$)4$

Absorption costing unit product cost $ $16$

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.