Carr Company produces a single product. During the past year, Carr manufactured 34,060 units and sold 28,600 units. Production costs for the year were as follows:

Fixed manufacturing overhead	$510,900
Variable manufacturing overhead	$269,074
Direct labor	$173,706
Direct materials	$255,450

Sales totaled $1,172,600, variable selling expenses totaled $148,720, and fixed selling and administrative expenses totaled $214,578. There were no units in beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the net income for the year would be:

	$27,846 lower than under absorption costing
	$27,846 higher than under absorption costing
→	$81,900 lower than under absorption costing
	$81,900 higher than under absorption costing

Change in units in inventory = Units produced - Units sold

= 34,060 units - 28,600 units = 5,460 unit increase

Fixed manufacturing overhead per unit = Fixed manufacturing overhead ÷ Units produced

= $510,900 ÷ 34,060 units = $15 per unit

Since the units produced exceeds the units sold, fixed manufacturing overhead costs will be deferred in inventory and absorption costing net operating income will exceed variable costing net operating income.

Manufacturing overhead deferred in inventory = Fixed manufacturing overhead per unit ×

Increase in units in inventory = $15 per unit × 5,460 units = $81,900