Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Units in beginning inventory0Units produced10,000Units sold9,000 Direct materials$40,000Direct labor$20,000Variable manufacturing overhead$12,000Fixed manufacturing overhead$25,000Variable selling and administrative expenses$4,500Fixed selling and administrative expenses$30,000 Assume that direct labor is a variable cost. Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?
A. Absorption costing net operating income would be higher than variable costing net operating income by $2,500.
B. Absorption costing net operating income would be higher than variable costing net operating income by $5,500.
C. Variable costing net operating income would be higher than absorption costing net operating income by $5,500.
D. Variable costing net operating income would be higher than absorption costing net operating income by $2,500.
Answer: A
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