Problem 3 (5 points) Joseph Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below: Joseph Company Income Statement Sales (35,000 units X $25 per unit) Cost of goods sold (35,000 units x $16 per unit) Gross margin......... Selling and administrative expenses Net operating income $875,000 560,000 315,000 280,000 $ 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 per unit product cost given above is computed as follows: Direct Material Direct labor 6 4 3 Fixed manufacturing overhead (120,000/40,000) 3 16 Variable Manufacturing overhead Instructions: a. Redo the company's income statement in the contribution format using variable costing.