Polaris's ending inventory amounts (in $ millions) are shown below:
2011 2010 2009
$298.04...... $235.93...... $179.32
Required
1. Assume Polaris uses variable costing for some of its internal reports. For each of the years 2011 and 2010, would net income based on variable costing be higher, lower, or no different from net income based on absorption costing? Explain.
2. Assume Polaris is considering implementing a just-in-time (JIT) inventory system. Would a JIT system increase, decrease, or have no effect on differences in net income between absorption costing and variable costing? Explain.