Kern Corporation Produces a Single Product

Multiple Choice

Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Assume that direct labor is a variable cost.
Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?

A) Absorption costing net operating income would be higher than variable costing net operating income by $2,500.
B) Variable costing net operating income would be higher than absorption costing net operating income by $2,500.
C) Absorption costing net operating income would be higher than variable costing net operating income by $5,500.
D) Variable costing net operating income would be higher than absorption costing net operating income by $5,500.