Grehan Company produces and sells wooden pallets that are used in moving and stacking materials. The operating costs for the past year were as follows:

Variable costs per unit:

Direct materials                                                  $3.60

Direct labor                                                          2.00

Variable overhead                                          0.40

Variable selling expenses                               0.30

Fixed costs per year:

Fixed overhead                                              $180,000

Fixed selling and administrative                             70,000

During the year, Grehan produced 200,000 wooden pallets and sold 207,000 at

$10 each. Grehan had 9,300 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing.