Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports toshareholders, creditors, and the government. The company has provided the following data:Year 1 Year 2 Year 3Inventories:Beginning (units) .................................. 200 170 180Ending (units) ....................................... 170 180 220Variable costing net operating income .... $1,080,400 $1,032,400 $996,400The company’s fixed manufacturing overhead per unit was constant at $560 for all three years.Required:1. Determine each year’s absorption costing net operating income. Present your answer in the form of areconciliation report as shown in Exhibit 5A–4.2. In Year 4, the company’s variable costing net operating income was $984,400 and its absorption costingnet operating income was $1,012,400. Did inventories increase or decrease during Year 4? How muchfixed manufacturing overhead cost was deferred or released from inventory during Year 4?
Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. 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) .................................. 200 170 180
Ending (units) ....................................... 170 180 220
Variable costing net operating income .... $1,080,400 $1,032,400 $996,400
The company’s fixed manufacturing overhead per unit was constant at $560 for all three years.
Required:
1. Determine each year’s absorption costing net operating income. Present your answer in the form of a
reconciliation report as shown in Exhibit 5A–4.
2. In Year 4, the company’s variable costing net operating income was $984,400 and its absorption costing
net operating income was $1,012,400. Did inventories increase or decrease during Year 4? How much
fixed
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