Question
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) 210 160 180 Ending (units) 160 180 230 Variable costing net operating income $290,000, $279,000 $250,000 The company's fixed manufacturing overhead per unit was constant at $560 for all three years. Requirement 1: Determine each years absorption costing net operating income. Present your answer in the form of a reconciliation report for year 1, 2 and 3. Year 1 Year 2 Year 3 Beginning inventories Ending inventories Change in inventories Fixed manufacturing overhead in beginning inventories Fixed manufacturing overhead in ending inventories Fixed manufacturing overhead deferred in (released from) inventorie Variable costing net operating income Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing Absorption costing net operating income Requirement 2: In Year 4, 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? (b) How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4? Deferred or released ??? Ffixed manufacturing overhead cost $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started