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 $290,000 210 160 200 $279,000 160 200 240 $250,000 The company's fixed manufacturing overhead per unit was constant at $560 for all three years. 2. Assume in Year 4 that the company's variable costing net operating income was $240,000 and its absorption costing net operating income was $270,000. a. Did inventories increase or decrease during Year 4? Increase Decrease b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4? Fixed manufacturing overhead cost inventory during Year 4

Answer 1

2) When variable costing net operating income is lower than absorption Costing net operating income so its means inventories is decrease

b) Fixed manufacturing overhead released in ending inventory during year 4 (270000-240000) = $30000