Cutterski Corporation manufactures a propeller. Shown below is Cutterski's cost structure:

	Variable cost per propeller	Total fixed cost for the year
Manufacturing cost	$128	$1,498,000
Selling and administrative expense	$40	$862,500

In its first year of operations, Cutterski produced 85,600 propellers but only sold 75,000. Which costing method (variable or absorption) will generate a higher net operating income in Cutterski's first year of operations and by how much?

Noreen 4e Rechecks 2017-24-03

variable by $185,500

variable by $307,400

absorption by $185,500

absorption by $307,400