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High Tension Transformers, Inc., manufactures heavy-duty transformers for electrical switching stations. 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)	180	150	160
Ending (units)	150	160	200
Variable costing net operating income	$292,400	$269,200	$251,800

The companys fixed manufacturing overhead per unit was constant at $450 for all three years.

Required:

1.	Determine each years absorption costing net operating income. (Amounts to be deducted should be indicated with a minus sign.)

Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
	Year 1	Year 2	Year 3
Variable costing net operating income	$	$	$
Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing
Absorption costing net operating income	$	$	$

2.	In Year 4, the companys variable costing net operating income was $240,200 and its absorption costing net operating income was $267,200.

a.

Did inventories increase or decrease during Year 4?

	Increased
	Decreased

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

Fixed manufacturing overhead cost (Click to select)released fromdeferred in inventory during Year 4

$ .