Krepps Corporation produces a single product. Last year, Krepps manufactured 35,040 units and sold 29,600 units. Production costs for the year were as follows:

Direct materials	$	266,304
Direct labor	$	157,680
Variable manufacturing overhead	$	297,840
Fixed manufacturing overhead	$	385,440

Sales totaled $1,450,400 for the year, variable selling and administrative expenses totaled $156,880, and fixed selling and administrative expenses totaled $255,792. 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

• $33,184 higher than under absorption costing.

• $59,840 lower than under absorption costing.

• $33,184 lower than under absorption costing.

• $59,840 higher than under absorption costing.