! Required information Exercise 7-3 Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO7-3] (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) Ending (units) Variable costing net operating income 220 170 $300,000 170 190 $269,000 190 220 $250,000 The company's fixed manufacturing overhead per unit was constant at $500 for all three years. Exercise 7-3 Part 2 2. Assume in Year 4 that the company's 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? O Increase O Decrease b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4? Fixed manufacturing overhead cost inventory during Year 4