Krepps Corporation Produces a Single Product

Multiple Choice

Krepps Corporation produces a single product. Last year, Krepps manufactured 20,000 units and sold 15,000 units. Production costs for the year were as follows: Sales totaled $825,000 for the year, variable selling and administrative expenses totaled $108,000, and fixed selling and administrative expenses totaled $165,000. 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:

A) $101,250 lower than under absorption costing.
B) $60,000 lower than under absorption costing.
C) $101,250 higher than under absorption costing.
D) $60,000 higher than under absorption costing.