Pandora Pillow Company’s planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow:

The cost per unit remained the same in the current year as in the previous year. There were no work-inprocess inventories at the beginning or end of the year.
Required:
1. What would be Pandora Pillow Company’s finished-goods inventory cost on December 31 under the variable-costing method?
2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?

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Direct material used Direct labor incurred. $40,000 20,000 Fixed manufacturing overhead 25,000 Variable manufacturing overhead. 12,000 Fixed selling and administrative expenses 30,000 Variable selling and administrative expenses 4,500 Finished-goods inventory, January 1 None