Innerspace Incorporated produces drones. 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 th following data: Year 1 Year 2 Year 3 Inventories Beginning (units) Ending (units) Variable costing net operating income 220 160 $290,000 160 180 $269,000 180 240 $260,000 The company's 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 $ 290,000 $ 269,000 $ 260,000 Variable costing net operating income Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income Innerspace Incorporated produces drones. 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) Ending (units) Variable costing net operating income 220 160 $290,000 160 180 $269,000 180 240 $ 260,000 The company's fixed manufacturing overhead per unit was constant at $400 for all three years. 2. Assume in Year 4 that the company's variable costing net operating income was $260,000 and its absorption costing net operating income was $290,000. a. Did inventories increase or decrease during Year 4? Increase O 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