Selected information concerning the operation of Kern Company for the year ended

December 31, 2017, is available as follows:

Units produced..............................................................................10,000

Units sold......................................................................................9,000

Direct materials used.....................................................................$40,000

Direct labor incurred.......................................................................20,000

Fixed factory overhead....................................................................25,000

Variable factory overhead.................................................................12,000

Fixed selling and administrative expenses..............................................30,000

Variable selling and administrative expenses.............................................4,500

Finished goods inventory, January 1, 2017...............................................None

No work-in-process inventories existed at the beginning or end of 2017.

Required:

1. What would be Kern's finished goods inventory cost under the variable (direct) costing method at December 31, 2017?

2. Which costing method-absorption or variable costing-would show a higher operating income for 2017, and by what amount?