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 companys fixed manufacturing overhead per unit was constant at $3,700 for all three years:

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 $3,700 for all three years: Year 1 Year 2 Year 3 Inventories: Beginning (units) Ending (units) Variable costing operating income 150 250 190 250 190 200 $293,600 $270,400 $253,000 Required: 1. Determine each year's absorption costing operating income. Present your answer in the form of a reconciliation report. Year 3 Absorption Costing Operating Incomes Year 1 Year 2 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 $ 0 2-a. In year 4, the company's variable costing operating income was $252,200 and its absorption costing operating income was $226,200. Did inventories increase or decrease during year 4? Increase Decrease 2-b. How much fixed manufacturing overhead cost was deferred or released from inventory during year 4? Fixed manufacturing overhead cost inventory during year 4