1. 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)	200	170	180
Ending (units)	170	180	220
Variable costing net operating income	$1,080,400	$1,032,400	$996,400

The companys fixed manufacturing overhead per unit was constant at $560 for all three years.

Required:

1. Calculate each years absorption costing net operating income. (Enter any losses or deductions as a negative value.)

Required:

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes

1 Year 2Year 3Year

Variable costing net operating income

Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing

Absorption costing net operating income

2. 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)	200	170	180
Ending (units)	170	180	220
Variable costing net operating income	$1,080,400	$1,032,400	$996,400

The companys fixed manufacturing overhead per unit was constant at $560 for all three years.

Assume in Year 4 that the companys variable costing net operating income was $984,400 and its absorption costing net operating income was $1,012,400.

a. Did inventories increase or decrease during Year 4?

multiple choice

• Increase

• Decrease

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

Assume in Year 4 that the companys variable costing net operating income was $984,400 and its absorption costing net operating income was $1,012,400.

a. Did inventories increase or decrease during Year 4?

multiple choice

• 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________

3. Royal Lawncare Company produces and sells two packaged productsWeedban and Greengrow. Revenue and cost information relating to the products follow:

	Product
	Weedban		Greengrow
Selling price per unit	$	6.00	$	7.50
Variable expenses per unit	$	2.40	$	5.25
Traceable fixed expenses per year	$	45,000	$	21,000

Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

	Total Company	Weedban	Greengrow