Pandora Pillow Company’s planned production for the year just ended was 22,300 units. This production level was achieved, but only 19,500 units were sold. Other data follow:
| Direct material used | $660,080 |
| Direct labor incurred | $356,800 |
| Fixed manufacturing overhead | $472,760 |
| Variable manufacturing overhead | $205,160 |
| Fixed selling and administrative expenses | $394,710 |
| Variable selling and administrative expenses | $125,995 |
| Finished-goods inventory, January 1 | None |
The cost per unit remained the same in the current year as in the previous year. There were no work-in-process inventories at the beginning or end of the year.
Required:
1. What would be Pandora Pillow Company’s finished-goods inventory cost on December 31 under the variable-costing method?
2-a. Which costing method, absorption or variable costing, would show a higher operating income for the year?
2-b. By what amount?
