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Whitman Company has just completed its first year of operations. The company’s absorption costing income statement...

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Accounting

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

  

Whitman Company
Income Statement
  Sales (38,000 units × $40.60 per unit)$1,542,800
  Cost of goods sold (38,000 units × $23 perunit)874,000
  Gross margin668,800
  Selling and administrative expenses437,000
  Net operating income$231,800

  

The company’s selling and administrative expenses consist of$285,000 per year in fixed expenses and $4 per unit sold invariable expenses. The $23 per unit product cost given above iscomputed as follows:

  

  Direct materials$10   
  Direct labor5   
  Variable manufacturing overhead3   
  Fixed manufacturing overhead ($260,000 ÷ 52,000units)5   
  Absorption costing unit product cost$23   
1.

Prepare the company’s income statement in the contributionformat using variable costing.

2.

Reconcile any difference between the net operating income onyour variable costing income statement and the net operating incomeon the absorption costing income statement.

(Just need the answer, thank you.)

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