Swain Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. The companys beginning balance in Retained Earnings is $63,000. It sells one product for $172 per unit and it generated total sales during the period of $614,040 while incurring selling and administrative expenses of $54,700. Swain Company does not have any variable manufacturing overhead costs and its standard cost card for its only product is as follows:

	(1) Standard Quantity or Hours		(2) Standard Price or Rate			Standard Cost (1) x (2)
Direct materials	6.0	pounds	$	8	per pound	$	48
Direct labor	3.0	hours	$	12	per hour		36
Fixed manufacturing overhead	3.0	hours	$	20	per hour		60
Total standard cost per unit						$	144

During the period, Swain recorded the following variances:

Materials price variance	$	3,575	U
Materials quantity variance	$	9,350	F
Labor rate variance	$	4,075	U
Labor efficiency variance	$	6,775	U
Fixed overhead budget variance	$	1,475	U
Fixed overhead volume variance	$	6,200	F

Required:

1. When Swain closes its standard cost variances, the cost of goods sold will increase (decrease) by how much?

2. Prepare an income statement for the year.