Jorgensen 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:

	Year1	Year 2	Year 3
Inventories:
Beginning (units	$200	$170	$180
Ending (units)	$170	$180	$220
Variable costing net operating income	$1,080,400	$1,032,400	$996,400

The company's fixed manufacturing overhead per unit was constant at $560 for all three years.

Required:

1. Calculate each year's absorption costing net operating income.

Year 1	Year 2	Year 3
Variable Costing and Costing Net Operating Incomes.
Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing.
Absorption costing net operating income.

Assume in year 4 that the company's variable Costing net operating income was $984,400 and it's absorption costing net operating income was $1,012,400.

a. Did inventories increase or decrease during year4?

i. increase

ii. decrease

b. How much-fixed manufacturing overhead cost was secret or released from inventory during year 4?