Question
Jorgansen Lighting, Incorporated, 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, Incorporated, 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) | 200 | 160 | 190 |
| Ending (units) | 160 | 190 | 230 |
| Variable costing net operating income | $ 300,000 | $ 269,000 | $ 250,000 |
The companys fixed manufacturing overhead per unit was constant at $550 for all three years.
2. Assume in Year 4 that the companys variable costing net operating income was $260,000 and its absorption costing net operating income was $300,000.
a. Did inventories increase or decrease during Year 4?
multiple choice
-
Increase
-
Decrease
b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
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Fundamental accounting principle
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
21st edition
1259119831, 9781259311703, 978-1259119835, 1259311708, 978-0078025587
