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. The company provided the following data:
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Inventories | |||
| Beginning (units) | 210 | 160 | 180 |
| Ending (units) | 160 | 180 | 220 |
| Variable costing net operating income | $ 290,000 | $ 269,000 | $ 260,000 |
The companys fixed manufacturing overhead per unit was constant at $560 for all three years.
2. Assume in Year 4 the companys variable costing net operating income was $240,000 and its absorption costing net operating income was $290,000.
- Did inventories increase or decrease during Year 4?
- How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
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Principles of Auditing and Other Assurance Services
Authors: Ray Whittington, Kurt Pany
20th edition
77729145, 978-1259295430, 1259295435, 978-0077729141
