Pandora Pillow Company's planned production for the year just ended was 22,500 units. This production level was achieved, but only 20,000 units were sold. Other data follow:

Direct Material used: 668,250

Direct labor incurred: 348,750

Fixed manufacturing overhead: 479,250

Variable manufacturing overhead: 218,250

fixed selling and administrative expenses: 387000

variable selling and admin expenses: 120,375

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 variale costing method.

2-a Which costing method, absorption or variable costing, would show a higher operating income for the year?

2-B. by what amount the operating income differs between the costing methods, absorption or variable costing?