Tim's Tools, a manufacturer of cordless drills, began operations this year. During this year, the company produced 20,000 units and sold 18,000 units. At year-end the company reported the following income statement using absorption costing:

Sales (18,000 $30) $540,000

Cost of goods sold (18,000 $14) 252,000

Gross margin $288,000

Selling and administrative expenses 90,000

Net income $198,000

Production costs per unit total $14, which consists of $12.90 in variable production costs and $1.10 in fixed production costs (based on the 20,000 units produced). 60% of total selling and administrative expenses are variable. Compute net income under variable costing.

A. $307,800

B. $198,000

C. $195,800

D. $288,000

E. $220,000