Harris Company produces a single product

ECONOMICS

Multiple Choice

Use the following information to answer this question.

Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:



Production Cost Data

Direct materials

$153,000

Direct labor

$110,500

Variable manufacturing overhead

$204,000

Fixed manufacturing overhead

$255,000



Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the company's net operating income for the year would be _______ than under absorption costing.

A. $60,000 higher

B. $60,000 lower

C. $108,000 higher

D. $108,000 lower



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