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) Ending (units) Variable costing net operating income 219 151 $295,500 151 188 $269,000 188 237 $258,500 The company's fixed manufacturing overhead per unit was constant at $569 for all three years. value: 2.00 points Required information Required: 1. Determine each year's absorption costing net operating income. 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 $ 0 $ 0 $ 0

Answer 1

	Year 1	Year 2	Year 3
Variable costing net operating income	295,500	269,000	258,500
+(-) fixed manufacturing overhead deferred in inventory	(38,692)	21,053	27,881
Absorption costing net operating income	256,808	290,053	286,381

2.

A. Increase

B. Fixed manufacturing overhead deferred in inventory during year 16,800 (272,500-255,700)