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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

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) 210 151 197
Ending (units) 151 197 228
Variable costing net operating income $294,000 $277,400 $256,100

The companys fixed manufacturing overhead per unit was constant at $568 for all three years.

Required:
1.

Determine each years absorption costing net operating income.

2.

In Year 4, the companys variable costing net operating income was $242,900 and its absorption costing net operating income was $262,400.

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?

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