Question

Required information The following information applies to the questions displayed below.) 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) Ending (units) Variable costing net operating income 210 160 $290,000 160 200 $279,000 200 240 $250,000 The company's fixed manufacturing overhead per unit was constant at $560 for all three years. Required: 1. Calculate each year's absorption costing net operating income. (Enter any losses or deductions as a negative value.) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income

Answer 1

Ans:

1
	Year 1	Year 2	Year 3
Variable costing net operating income	290,000	279,000	250,000
Add (deduct) fixed manufacturing overhead deferred	-28000	22400	22400
in (released from) inventory under absorption costing
Absorption costing net operating income	262000	301400	272400

Workings for 1:
	Year 1	Year 2	Year 3
Add (deduct) fixed manufacturing overhead deferred	(160-210)*560	(200-160)*560	(240-200)*560
in (released from) inventory under absorption costing

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