Question

Required information [The following information applies to the questions displayed below.) 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) Ending (units) Variable costing net operating income 203 152 152 185 $290,300 $278.200 185 229 $250,500 The company's fixed manufacturing overhead per unit was constant at $559 for all three years. Required: 1. Determine each year's absorption costing net operating income. X Answer is complete but not entirely correct. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income $ 290,300 $ 278,200 $ 250,500 Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under 28,509 (18,447) (24,596) absorption costing Absorption costing net operating income $ 261,791 $ 259,753 $ 225,904

Answer 1

Reconciliation of variable costing and absorption costing net operating income

	Year 1	Year 2	Year 3
Variable costing net operating income	290300	278200	250500
Add (deduct) Fixed manufacturing overhead deferred in (released from) Inventory under absorption costing	-28509	33*559 = 18447	44*559 = 24596
Absorption costing net operating income	261791	296647	275096