Daffodil Company is a family-owned company located in Chhina. The company produces a handcrafted chinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $990. Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		240
Units sold		225
Units in ending inventory		15
Variable costs per unit:
Direct materials	$	120
Direct labor	$	330
Variable manufacturing overhead	$	50
Variable selling and administrative	$	25
Fixed costs:
Fixed manufacturing overhead	$	72,000
Fixed selling and administrative	$	27,000

The absorption costing income statement prepared by the companys accountant for last year appears below:

Sales	$	222,750
Cost of goods sold		180,000
Gross margin		42,750
Selling and administrative expense		32,625
Net operating income	$	10,125

1a. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year?

fixed manufacturing overhead cost included in inventory __________

1b. Prepare an income statement for last year using variable costing.

1c. What is the amount of the difference in net operating income between the two costing methods?

___________________

Variable Costing Income Statement 0 0 0 $ 0