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 $4,200 for all three years:

Required:

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

2-a. In year 4, the companys variable costing operating income was $257,200 and its absorption costing operating income was $228,700. Did inventories increase or decrease during year 4?

multiple choice

• Increase

• Decrease

2-b. How much fixed manufacturing overhead cost was deferred or released from inventory during year 4?

6 points Year 1 Year 2 Year 3 Inventories: Beginning (units) Ending (units) Variable costing operating income 175 225 165 225 165 250 $294,100 $270,900 $253,500 eBook Ask Exit Submit Check my work Ending (units) Variable costing operating income 225 165 250 $294,100 $270,900 $253,500 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 $ 0 $ Absorption costing net operating income 0 S 0 5 of 6 HE Show all WhatsApp Image.jpeg ENG eg 07-03-2021 WhatsApp Image....jpeg o c Increase O 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 released from deferred in Next >