Diego Company manufactures one product that is sold for $80 per unit. The following information pertains to the companys first year of operations in which it produced 40,000 units and sold 35,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	24
Direct labour	$	14
Variable manufacturing overhead	$	2
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	800,000
Fixed selling and administrative expenses	$	496,000

What is the companys net operating income under variable costing?

What is the companys total gross margin (loss) under absorption costing?

What is the companys net operating income (loss) under absorption costing?

If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?