Harris Corporation Produces a Single Product

Multiple Choice

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

A) $60,000 higher than under absorption costing
B) $108,000 higher than under absorption costing
C) $108,000 lower than under absorption costing
D) $60,000 lower than under absorption costing