organsen Lighting, Incorporated, 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) 220 160 180 Ending (units) 160 180 240 Variable costing net operating income $ 290,000 $ 269,000 $ 250,000 The company’s fixed manufacturing overhead per unit was constant at $560 for all three years. Required: 1. Calculate each year’s absorption costing net operating income.
Jorgansen Lighting, Incorporated, 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) | 220 | 160 | 180 |
| Ending (units) | 160 | 180 | 240 |
| Variable costing net operating income | $ 290,000 | $ 269,000 | $ 250,000 |
The company’s fixed manufacturing
Required:
1. Calculate each year’s absorption costing net operating income. (Enter any losses or deductions as a negative value.)
The variable costing income differs from absorption costing income due to fixed costs deferred in or released from the inventory. The fixed costs deferred in ending inventory lead to higher absorption costing income as compared to variable costing income.
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