The following information pertains to Chacon Inc. for last year:

Beginning inventory in units ...........................5,000

Units produced .......................................20,000

Units sold .............................................23,700

Costs per unit:

Direct materials ........................................$8.00

Direct labor ............................................$4.00

Variable overhead ....................................$1.50

Fixed overhead* ......................................$4.15

Variable selling expenses ..............................$3.00

Fixed selling and administrative expenses ........$24,300

* Fixed overhead totals $83,000 per year.

Assume that the selling price is $27 per unit.

Required:

1. Calculate operating income using absorption costing.

2. Calculate operating income using variable costing.