Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation [LO6-2, LO6-3]

Whitman Company has just completed its first year of operations. The companys absorption costing income statement for the year follows:

Whitman Company Income Statement
Sales (39,000 units $42.60 per unit)	$ 1,661,400
Cost of goods sold (39,000 units $23 per unit)	897,000
Gross margin	764,400
Selling and administrative expenses	448,500
Net operating income	$ 315,900

The companys selling and administrative expenses consist of $292,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows:

Direct materials	$ 12
Direct labor	3
Variable manufacturing overhead	3
Fixed manufacturing overhead ($225,000 45,000 units)	5
Absorption costing unit product cost	$ 23

Required:

1. Redo the companys 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.

Exercise 6-12 (Algo) Variable Costing Income Statement; Reconciliation (LO6-2, LO6-3) 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 (39,000 units X $42.60 per unit) Cost of goods sold (39,000 units * $23 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,661,400 897,000 764,400 448,500 $ 315,900 The company's selling and administrative expenses consist of $292,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($225,000 + 45,000 units) Absorption costing unit product cost $ 12 3 3 5 $ 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Redo the company's income statement in the contribution format using variable costing. Whitman Company Variable Costing Income Statement