Reference: 08-15

Last year, Harris Company manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:

Direct materials$153,000Direct labour110,500Variable manufacturing overhead204,000Fixed manufacturing overhead255,000Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labour is a variable cost.

Under variable costing, what was the company's operating income for the year, as compared with under absorption costing?

Question 1 options:

A)

$60,000 lower than under absorption costing.

B)

$108,000 higher than under absorption costing.

C)

$60,000 higher than under absorption costing.

D)

$108,000 lower than under absorption costing.