1. Bungalow Industries manufactures and sells hardware for homes such as door knobs and cabinet pulls. Each door knob sells for $15 per unit and during its first year of operations, Bungalow produced 24,000 units and sold 20,000 units. The company has fixed manufacturing overhead costs of $126,000 and fixed selling and administrative expenses of $32,000. Each door knob has $3.00 of direct materials, $1.00 of direct labor and $0.50 of variable overhead.

How much lower would profit be if the company chose to use direct (variable) costing?