Krepps Corporation produces a single product. Last year, Krepps manufactured 20,000 units and sold 15,000 units. Production costs for the year were as follows: Direct materials$170,000Direct labor$110,000Variable manufacturing overhead$200,000Fixed manufacturing overhead$240,000 Sales totaled $825,000 for the year, variable selling and administrative expenses totaled $108,000, and fixed selling and administrative expenses totaled $165,000. There was no beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company's net operating income for the year would be:
A. $60,000 lower than under absorption costing.
B. $60,000 higher than under absorption costing.
C. $101,250 lower than under absorption costing.
D. $101,250 higher than under absorption costing.
Answer: A
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