Exercise 8-3 Reconciliation of Absorption and Variable Costing Operating Incomes [LO3] Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all-season use. 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 data for their swim spa business in years 1, 2, and 3 shown below. The company's fixed manufacturing overhead per unit was constant at $2,500 for all three years Year 1 Year 2 Year 3 Inventories: Beginning (units) Ending (units) 150 200 $292,400 269,200 $251,800 150 160 160 150 Variable costing operating income Required 1. Determine each year's absorption costing operating income. Present your answer in the form of a reconciliation report. Absorption Costing Operating Incomes Year 1 Year 2 Year 3 Variable costing operating income Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing net operating income S 292,400 269,200S 251,800 S 292,400 S 269,200 S 251,800 2-a. In year 4, the company's variable costing operating income was $240,200 and its absorption costing operating income was $205,200. Did inventories increase or decrease during year 4? OIncrease Decrease 2-b. How much fixed manufacturing overhead cost was deferred or released from inventory during year 4? Fixed manufacturing overhead cost inventory during year 4