T-shirt man is a direct marketer of popular t-shirts. Following is information about its revenue and cost structure:

Selling price: $15/t-shirt

Variable costs:

Production (manufacturing costs): $3/t-shirt

Selling & Administration (non-mfg costs): $1/t-shirt

Fixed costs:

Production (manufacturing costs): $1,000,000/year

Selling & Administration (non0mfg costs): $2,000,000/year

Assume 400,000 t-shirts are produced and 350,000 are sold in 2011. What is income under variable costing?

$975,000

$1,400,000

$850,000

$2,250,000