Krepps Corporation produces a single product. Last year, Krepps manufactured 30,030 units and sold 24,700 units. Production costs for the year were as follows:

Direct materials	$	243,243
Direct labor	$	126,126
Variable manufacturing overhead	$	237,237
Fixed manufacturing overhead	$	420,420

Sales totaled $1,272,050 for the year, variable selling and administrative expenses totaled $133,380, and fixed selling and administrative expenses totaled $195,195. 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

• $28,249 lower than under absorption costing.

• $28,249 higher than under absorption costing.

• $74,620 lower than under absorption costing.

• $74,620 higher than under absorption costing.