E$8\mathrm{.}23($LO $1,2)$ Ortiz company produced $9,000$ units during the past year but sold only $8,200$ of the units. The following additional information is also available:

Direct materials used $$79,000$

Direct labour incurred $30,000$

Variable manufacturing overhead $21,500$

Fixed manufacturing overhead $45,000$

Fixed selling and administrative expenses $70,000$

Variable selling and administrative expenses $10,000$

There was no work in process inventory at the beginning of the year. Ortiz did not have any beginning finished goods inventory either.

Instructions:

a$.$ Calculate Ortiz Company$$s finished goods inventory cost on December $31$ under variable costing.

b$.$ Determine which costing method, absorption or variable, would show a higher net income for the year, By what amount.

Calculate the manufacturing cost under absorption and variable costing and explain the difference.