Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all-season use. 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 data for their swim spa business in years 1, 2, and 3 shown below.

The company's fixed manufacturing overhead per unit was constant at $4,300 for all three years:

Year 1 Year 2 Year 3

Inventories:

Beginning (units) 180 220 160

Ending (units) 220 160 260

Variable costing operating income $294,200 $271,000 $253,600

1. Determine each year's absorption costing operating income. Present your answer in the form of a reconciliation report.

Absorption Costing Operating Incomes Year 1 Year 2 Year 3 Variable costing operating income Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing net operating income 0 0