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Diego Company manufactures one product that is sold for $80 per unit. The following information pertains to the companys first year of operations in which it produced 40,000 units and sold 35,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	24
Direct labour	$	14
Variable manufacturing overhead	$	2
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	800,000
Fixed selling and administrative expenses	$	496,000

4. What is the companys net operating income under variable costing?