Pandora Pillow Company’s planned production for the year just ended was 22,500 units. This production level was achieved, but only 18,800 units were sold. Other data follow:

Direct material used	$	659,250
Direct labor incurred		344,250
Fixed manufacturing overhead		474,750
Variable manufacturing overhead		209,250
Fixed selling and administrative expenses		411,750
Variable selling and administrative expenses		138,375
Finished-goods inventory, January 1		None

The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.

Required:
1. What would be Pandora Pillow Company’s finished-goods inventory cost on December 31 under the variable-costing method? (Do not round intermediate calculations.)
2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year?
2-b. By what amount? (Do not round intermediate calculations.)

1.	Finished-goods inventory cost
2-a.	Higher operating income method
2-b.	Difference in reported income