Kern Corporation produces a single product. Selected information concerning the operations of the company follow:

Units in beginning inventory	0
Units produced	10,000
Units sold	9,000

Direct materials	$ 40,000
Direct labor	$ 20,000
Variable manufacturing overhead	$ 12,000
Fixed manufacturing overhead	$ 25,000
Variable selling and administrative expenses	$ 4,500
Fixed selling and administrative expenses	$ 30,000

Assume that direct labor is a variable cost.

Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?

Multiple Choice

Absorption costing net operating income would be higher than variable costing net operating income by $2,500.

Variable costing net operating income would be higher than absorption costing net operating income by $2,500.

Absorption costing net operating income would be higher than variable costing net operating income by $5,500.

Variable costing net operating income would be higher than absorption costing net operating income by $5,500.