Summary of companys first year of operations: Per Unit Per Year Production (units) 20,000 Sold (units) 15,000 Selling price $ 500.00 Direct materials $ 100.00 Direct labor $ 150.00 Variable manufacturing overhead $ 140.00 Fixed manufacturing overhead $500,000 Which of the following correctly explains the relationship between the variable costing net operating income and the absorption costing net operating income?

a. The net operating income under variable costing will be higher than the net operating income under absorption costing by $500,000.

b. The net operating income under absorption costing will be lower than the net operating income under variable costing by $125,000.

c. The net operating income under variable costing will be lower than the net operating income under absorption costing by $125,000.

d. The absorption costing net operating income will be higher than the variable costing net operating income by $500,000.