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Exercise 7-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO7-3]

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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)	210	150	200
Ending (units)	150	200	220
Variable costing net operating income	$ 290,000	$ 279,000	$ 250,000

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

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes 1 2 3
Variable costing net operating income
Add or deduct fixed manufacturing deferred in inventory under absorption costing
Absorption costing net operating income