( Ending inventory valuation; absorption vs. variable costing) Pena Royals Company produces baseball caps. In May 2006, the company manufactured 18,000 caps and sold 16,560 caps. The cost per unit for the 18,000 caps pro¬ duced was as follows:

There was no beginning inventory for May.

a. What is the value of ending inventory using absorption costing?

b. What is the value of ending inventory using variable costing?
C. Which accounting method, variable or absorption, would have produced the higher net income for May?LO1.

Direct material $4.00 Direct labor 2.00 Variable overhead 1.00 Fixed overhead 1.50 Total $8.50