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 $860. Selected data for the company's operations last year follow:

Units in beginning inventory0Units produced320Units sold285Units in ending inventory35Variable costs per unit:Direct materials$135Direct labor$355Variable manufacturing overhead$30Variable selling and administrative$15Fixed costs:Fixed manufacturing overhead$64,000Fixed selling and administrative$27,000

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

Sales$245,100Cost of goods sold205,200Gross margin39,900Selling and administrative expense31,275Net operating income$8,625

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?

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

B)Prepare an income statement for last year using variable costing.

C)What is the amount of the difference in net operating income between the two costing methods?