Breckett Co. produces a single product. Selected information concerning the operations of the company follow:
Units in beginning inventory	0
Units produced	10,000
Units sold	7,500
Direct materials	$40,000
Direct labor	$20,000
Variable manufacturing overhead	$12,000
Fixed manufacturing overhead	$25,000
Variable selling and administrative expenses	$4,500
Fixed selling and administrative expenses	$30,000
Assume that direct labor is a variable cost. Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?

Absorption costing net operating income would be higher than variable costing net operating income by $2,500.

Variable costing net operating income would be higher than absorption costing net operating income by $2,500.

Absorption costing net operating income would be higher than variable costing net operating income by $6,250.

Variable costing net operating income would be higher than absorption costing net operating income by $6,250.