Required information

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Diego Company manufactures one product that is sold for $$80$ per unit. The following information pertains to the

company's first year of operations in which it produced $40,000$ units and sold $35,000$ units.

Variable costs per unit:

Manufacturing:

Direct materials

Direct labour

Variable manufacturing overhead

Variable selling and administrative

Fixed costs per year:

Fixed manufacturing overhead

$$800,000$

Fixed selling and administrative expenses

$$496,000$

What is the company's net operating income under variable costing?