Exercise 7-3 Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO7-3]

[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)	210	170	200
Ending (units)	170	200	220
Variable costing net operating income	$290,000	$279,000	$260,000

The companys fixed manufacturing overhead per unit was constant at $400 for all three years.

Required: 1. Calculate each year's absorption costing net operating income. (Enter any losses or deductions as a negative value.) 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