Question

Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the following data: Year 1 Year 2 Year 3 Inventories Beginning (units) 210 150 200 Ending (units) 150 200 230 Variable costing net operating income $290,000 $269,000 $260,000 The company’s fixed manufacturing overhead per unit was constant at $560 for all three years. rev: 03_09_2019_QC_CS-162392 Required: 1. Calculate each year’s absorption costing net operating income.

Answer 1

Calculate absorption costing net operating income

	Year 1	Year 2	Year 3
Variable costing net operating income	290000	269000	260000
Add (less) Fixed manufacturing overhead	-33600	28000	16800
Absorption costing net operating income	256400	297000	276800