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 1Year 2Year 3Inventories Beginning (units)220170190Ending (units)170190220Variable costing net operating income$290,000$279,000$250,000 The company’s fixed manufacturing overhead per unit was constant at $400 for all three years. 2. Assume in Year 4 that the company’s variable costing net operating income was $250,000 and its absorption costing net operating income was $270,000. a. Did inventories increase or decrease during Year 4? multiple choiceIncreaseDecrease b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4? Fixed manufacturing overhead cost inventory during Year 4

Question 2 Part (a) In Year 4, Inventories must have increased because absorption costing net…

Answered: Jorgansen Lighting, Inc., manufactures…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter18: Activity-based Costing

Section: Chapter Questions

Problem 3CMA: Young Company is beginning operations and is considering three alternatives to allocate...

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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)	220	170	190
Ending (units)	170	190	220
Variable costing net operating income	$290,000	$279,000	$250,000

The company’s fixed manufacturing overhead per unit was constant at $400 for all three years.

2. Assume in Year 4 that the company’s variable costing net operating income was $250,000 and its absorption costing net operating income was $270,000.

a. Did inventories increase or decrease during Year 4?

multiple choice

Increase
Decrease

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

Fixed manufacturing overhead cost

inventory during Year 4

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