Krepps Corporation produces a single product. Last year, Krepps manufactured 20,000 units and sold 15,000 units. Production costs for the year were as follows:

Direct materials	$	170,000
Direct labor	$	110,000
Variable manufacturing overhead	$	200,000
Fixed manufacturing overhead	$	240,000

Sales totaled $825,000 for the year, variable selling and administrative expenses totaled $108,000, and fixed selling and administrative expenses totaled $165,000. 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:

$101,250 lower than under absorption costing.
		$60,000 lower than under absorption costing.
		$101,250 higher than under absorption costing.
		$60,000 higher than under absorption costing