Absorption vs. variable costing Reeses Tot Toy Boxes uses variable costing to manage its internal operations. The following data relate to the companys first year of operation, when 50,000 units were produced and 42,000 units were sold.

Variable Costs Per UnitDirect material$50.00Direct labor30.00Variable overhead14.00Variable selling costs12.00Total Fixed CostsSelling and administrative$1,500,000Manufacturing$1,000,000

How much higher (or lower) would the companys first-year net income have been if absorption costing had been used rather than variable costing? $AnswerAnswerHigher under absorption costingLower under absorption costing