Krepps Corporation produces a single product. Last year, Krepps manufactured 32,150 units and sold 26,900 units. Production costs for the year were as follows:

Direct materials	$ 234,695
Direct labor	$ 154,320
Variable manufacturing overhead	$ 279,705
Fixed manufacturing overhead	$ 482,250

Sales totaled $1,277,750 for the year, variable selling and administrative expenses totaled $158,710, and fixed selling and administrative expenses totaled $212,190. 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

$28,350 higher than under absorption costing.

$28,350 lower than under absorption costing.

$78,750 higher than under absorption costing.

$78,750 lower than under absorption costing.