ABC Company uses the FIFO method for costing its inventory. During the year it has the following information:

Opening inventory 300 units

Units produced 600

Units sold 600

Prior year fixed overhead costs $50 per unit

Current-year fixed overhead costs $44 per unit

Instructions

Calculate the difference between operating income in the current year if the company uses variable vs. absorption costing. Explain why this difference occurs in 1-2 sentences.