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) 220 170 180 Ending (units) 170 180 220 Variable costing net operating income $300,000 $279,000 $250,000 The company’s fixed manufacturing overhead per unit was constant at $500 for all three years. rev: 03_09_2019_QC_CS-162392 Required: 1. Calculate each year’s absorption costing net operating income. (Enter any losses or deductions as a negative value.)

Answer 1

Under absorption costing, the cost per unit is direct materials, direct labor, variable overhead, and fixed overhead. In this case, the fixed overhead per unit is calculated by dividing total fixed overhead by the number of units produced. We have not been provided information of Direct Material, Labour & Variable Overhead. So the calcualtion of answer will be different as mentioned:

Information given in Question:

Year	1	2	3
Beginning Units	220	170	180
Ending Units	170	180	220
Variable cost net operating Revenue	3,00,000	2,79,000	2,50,000
Fixed Overhead is $ 500 per unit

Based on this data answer will be as under:

Year	1	2	3
Beginning Units	220	170	180
Ending Units	170	180	220
Changing in Units	-50	10	40
Fixed Mfg O/H 500 per unit will be calculated on beginning units	1,10,000	85,000	90,000
Fixed Mfg O/H 500 per unit will be calculated on ending units	85,000	90,000	1,10,000
Differences in Fixed Overhead	-25,000	5,000	20,000
Variable cost net operating Revenue	3,00,000	2,79,000	2,50,000
Differences in Fixed Overhead	-25,000	5,000	20,000
Absorption Costing Net Operating Income	2,75,000	2,84,000	2,70,000

Information as mentioned in Question is described in tabular form of sequence with an answer.