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

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

  

Whitman Company
Income Statement
  Sales (38,000 units × $40.60 per unit) $ 1,542,800
  Cost of goods sold (38,000 units × $23 per unit) 874,000
  Gross margin 668,800
  Selling and administrative expenses 437,000
  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 in variable expenses. The $23 per unit product cost given above is computed as follows:

  

  Direct materials $ 10   
  Direct labor 5   
  Variable manufacturing overhead 3   
  Fixed manufacturing overhead ($260,000 ÷ 52,000 units) 5   
  Absorption costing unit product cost $ 23   
1.

Prepare 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.

(Just need the answer, thank you.)

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