Exercise $6-12($Algo$)$ Variable Costing Income Statement; Reconciliation $[$LO$6-2,$ LO$6-3]$

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 $(42,000$ units $\backslash$times $$44\mathrm{.}10$ per unit$)$ $ $1,852,200$

Cost of goods sold $(42,000$ units $\backslash$times $$24$ per unit$)1,008,000$

Gross margin $844,200$

Selling and administrative expenses $525,000$

Net operating income $ $319,200$

The company$$s selling and administrative expenses consist of $$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 $ $12$

Direct labor $3$

Variable manufacturing overhead $4$

Fixed manufacturing overhead $($$$270,000-$: $54,000$ units$)5$

Absorption costing unit product cost $ $24$

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.