Krepps Corporation produces a single product. Last year, Krepps manufactured 33,110 units and sold 27,600 units. Production costs for the year were as follows:

Direct materials	$ 248,325
Direct labor	$ 175,483
Variable manufacturing overhead	$ 294,679
Fixed manufacturing overhead	$ 463,540

Sales totaled $1,242,000 for the year, variable selling and administrative expenses totaled $140,760, and fixed selling and administrative expenses totaled $221,837. There was no beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the company's net operating income for the year would be:

Multiple Choice

• $30,305 lower than under absorption costing.

• $30,305 higher than under absorption costing.

• $77,140 lower than under absorption costing.

• $77,140 higher than under absorption costing.