Required information

Exercise 6-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3]

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[The following information applies to the questions displayed below.]

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	150	200
Ending (units)	150	200	230
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.

rev: 03_09_2019_QC_CS-162392

Exercise 6-3 (Algo) Part 1

Required:

1. Calculate each years absorption costing net operating income. (Enter any losses or deductions as a negative value.)

Required information

Exercise 6-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3]

Skip to question

[The following information applies to the questions displayed below.]

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	150	200
Ending (units)	150	200	230
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.

rev: 03_09_2019_QC_CS-162392

Exercise 6-3 (Algo) Part 2

2. Assume in Year 4 that the companys 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?

multiple choice

• Increase

• Decrease

b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?

Required information

Exercise 6-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3]

Skip to question

[The following information applies to the questions displayed below.]

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	150	200
Ending (units)	150	200	230
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.

rev: 03_09_2019_QC_CS-162392

Exercise 6-3 (Algo) Part 2

2. Assume in Year 4 that the companys 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?

multiple choice

• Increase

• Decrease

b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?