Ida Sidha Karya Company is a family-owned company located on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $840. Selected data for the company's operations last year follow:

Units in beginning inventory 0 Units produced 300 Units sold 275 Units in ending inventory 25 Variable costs per unit: Direct materials $ 100 Direct labor $ 310 Variable manufacturing overhead $ 30 Variable selling and administrative $ 35 Fixed costs: Fixed manufacturing overhead $ 66,000 Fixed selling and administrative $ 31,000

The absorption costing income statement prepared by the company's accountant for last year appears below:

Sales $ 231,000 Cost of goods sold 181,500 Gross margin 49,500 Selling and administrative expense 40,625 Net operating income $ 8,875

Required:

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

2. Prepare an income statement for last year using variable costing. What is the amount of thedifference in net operating income between the two costing methods?