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 219 164 188 164 188 228 $296,300 $277,800 $257,900 The company's fixed manufacturing overhead per unit was constant at $550 for all three years. Required: 1. Determine each year's absorption costing net operating income. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income 2. In Year 4, the company's variable costing net operating income was $243,300 and its absorption costing net operating income was $273,000. a. Did inventories increase or decrease during Year 4? Decrease Increase b. How much fixed manufacturing overhead cost was deferred in 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) Ending (units) Variable costing net operating income 219 164 188 164 188 228 $296,300 $277,800 $257,900 The company's fixed manufacturing overhead per unit was constant at $550 for all three years. Required: 1. Determine each year's absorption costing net operating income. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing net operating income Add (deduct) fixed manufacturing overhead deferred in (released from) inventory under absorption costing Absorption costing net operating income 2. In Year 4, the company's variable costing net operating income was $243,300 and its absorption costing net operating income was $273,000. a. Did inventories increase or decrease during Year 4? Decrease Increase b. How much fixed manufacturing overhead cost was deferred in or released from inventory during Year 4?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...
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Transcribed Image Text: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
219
164
188
164
188
228
$296,300
$277,800
$257,900
The company's fixed manufacturing overhead per unit was constant at $550 for all three years.
Required:
1. Determine each year's absorption costing net operating income.
Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Year 1
Year 2
Year 3
Variable costing net operating income
Add (deduct) fixed manufacturing overhead deferred
in (released from) inventory under absorption costing
Absorption costing net operating income
2. In Year 4, the company's variable costing net operating income was $243,300 and its absorption costing
net operating income was $273,000.
a. Did inventories increase or decrease during Year 4?
Decrease
Increase
b. How much fixed manufacturing overhead cost was deferred in or released from inventory during Year
4?
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