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)	214	162	197
Ending (units)	162	197	239
Variable costing net operating income	$298,600	$276,500	$258,700

The company’s fixed manufacturing overhead per unit was constant at $569 for all three years.

3.

value:
10.00 points

Required information

Required:

1. Determine each year’s absorption costing net operating income.

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Hint #1

Check my work

4.

value:
10.00 points

Required information

2. In Year 4, the company’s variable costing net operating income was $247,700 and its absorption costing net operating income was $264,800.

  

a. Did inventories increase or decrease during Year 4?

	Increase
	Decrease

b. How much fixed manufacturing overhead cost was deferred in or released from inventory during Year 4?

Answer 1