Required information Exercise 6-3 Reconciliation of Absorption and Variable Costing Net Operating Incomes (LO6-3) (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) 218 169 195 Ending (units) 169 195 222 Variable costing net operating $296,800 $255,100 $278,000 income The company's fixed manufacturing overhead per unit was constant at $558 for all three years. Exercise 6-3 Part 1 Required: 1. Determine each year's absorption costing net operating income. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income $ 0 $ $ 0 0 HIVERNIC. Beginning (units) Ending (units) Variable costing net operating income 218 169 169 195 $296,800 $278,000 195 222 $255,100 The company's fixed manufacturing overhead per unit was constant at $558 for all three years. Exercise 6-3 Part 2 2. In Year 4, the company's variable costing net operating income was $253,700 and its absorption costing net operating income was $264,600. a. Did inventories increase or decrease during Year 4? Decrease Increase b. How much fixed manufacturing overhead cost was deferred in or released from inventory during Year 4? Fixed manufacturing overhead cost inventory during Year 4 The company has provided the following data: Year 1 Year 2 Year 3 Inventories: Beginning (units) Ending (units) Variable costing net operating income 218 169 169 195 $296,800 $278,000 195 222 $255,100 The company's fixed manufacturing overhead per unit was constant at $558 for all three years. Exercise 6-3 Part 1 Required: 1. Determine each year's absorption costing net operating income. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income 0 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) 218 169 195 Ending (units) 169 195 222 Variable costing net operating $255,100 income $296,800 $278,000 The company's fixed manufacturing overhead per unit was constant at $558 for all three years. Exercise 6-3 Part 2 2. In Year 4. the company's variable costing net operating income was $253,700 and its absorption costing net operating income was $264,600. a. Did inventories increase or decrease during Year 4? O Increase Decrease b. How much fixed manufacturing overhead cost was deferred in or released from inventory during Year 4? Fixed manufacturing Overhead cost inventory during Year 4 MacBook Air
