Inventories: Beginning (units). Ending (units)... Variable costing net operating income..... Year 1 180 150 $292,400 Year 2 Year 3 150 160 160 200 $269,200 $251,800 The company's fixed manufacturing overhead per unit was constant at $450 for all three years. Required: a. Determine each year's absorption costing net operating income. Present your answer in the form of a reconciliation report. b. In Year 4, the company's variable costing net operating income was $240,200 and its absorption costing net operating income was $267,200. Did inventories increase or decrease during Year 4? How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
Inventories: Beginning (units). Ending (units)... Variable costing net operating income..... Year 1 180 150 $292,400 Year 2 Year 3 150 160 160 200 $269,200 $251,800 The company's fixed manufacturing overhead per unit was constant at $450 for all three years. Required: a. Determine each year's absorption costing net operating income. Present your answer in the form of a reconciliation report. b. In Year 4, the company's variable costing net operating income was $240,200 and its absorption costing net operating income was $267,200. Did inventories increase or decrease during Year 4? How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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113.
Transcribed Image Text:Question 6. High Tension Transformers Pty Ltd 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:
Inventories:
Beginning (units).
Ending (units)...
Variable costing net operating income.
Year 1
180
150
$292,400
Year 2
Year 3
150
160
160
200
$269,200 $251,800
The company's fixed manufacturing overhead per unit was constant at $450 for all
three years.
Required:
a. Determine each year's absorption costing net operating income. Present your answer
in the form of a reconciliation report.
b. In Year 4, the company's variable costing net operating income was $240,200 and its
absorption costing net operating income was $267,200. Did inventories increase or
decrease during Year 4? How much fixed manufacturing overhead cost was deferred
or released from inventory during Year 4?
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