(Ending inventory valuation; absorption vs. variable costing) Princeton Products Company produces leather wallets. In July 1997, the company manufactured 25,000 wallets. July sales were 23,400 wallets. The cost per wallet for the 25,000 wallets produced was

There was no beginning inventory for July.

a. What is the value of ending inventory using absorption costing?

b. What is the value of ending inventory using variable costing?

c. Which accounting method, variable or absorption, would have produced the higher net income for July?LO1

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Direct material $3.00 Direct labor Variable overhead 2.00 1.00 Fixed overhead 1.50 Total $7.50