EXERCISE $5-3$ Reconciliation of Absorption and Variable Costing Net Operating Incomes $[$LO$3]$

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 re$-$

to shareholders, creditors, and the government. The company has provided the following data:

The company's fixed manufacturing overhead per unit was constant at $$560$ for all three years.

Required:

Determine each year's absorption costing net operating income. Present your answer in the

form of a reconciliation report as shown in Exhibit $5-4.$

In Year $4,$ the company's variable costing net operating income was $$984,400$ and its absorp$-$

tion costing net operating income was $$1,012,400.$ Did inventories increase or decrease during

Year $4?$ How much fixed manufacturing overhead cost was deferred or released from inven$-$

tory during Year $4?$