B. This answer is incorrect. See the correct answer for an explanation.

C. This answer is incorrect. See the correct answer for an explanation.

D. The problem tells us that the volume variance is written off to cost of goods sold in the year incurred. The fixed overhead production-volume variance is budgeted fixed overhead minus the amount of applied fixed overhead. The total budgeted fixed overhead was $15,000 ($20 per unit × 750 units, the denominator level of activity that was used to calculate the per unit amount).

The amount applied to production was $20 per unit × 700 units produced, or $14,000. The amount produced (700 units) was lower than the expected amount of 750 units. Therefore, there is a production-volume variance of $1,000 ($20 × 50 units). Since we are told there were no spending variances, we know that actual fixed overhead was the same as budgeted fixed overhead. Therefore, the production-volume variance and the total fixed overhead variance were the same, and the fixed overhead was underapplied by $1,000. Since this variance is written off to cost of goods sold, $1,000 will be debited to cost of goods sold.

There were no price, efficiency or spending variances, so we know that actual variable manufacturing cost was the same as the standard variable manufacturing cost: $90 per unit. The standard fixed cost per unit was $20, so the total standard cost per unit was $110. We also assume that the cost of the 100 units in beginning finished goods inventory was $110 per unit, since we are not told otherwise.

Therefore, net operating income was: