EXERCISE 7-3 Reconciliation of Absorption and Variable Costing Net Operating Incomes L07-3 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 reports to share- holders, 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. 200 170 170 180 $1,080,400 $1,032,400 180 220 $996,400 The company's fixed manufacturing overhead per unit was constant at $560 for all three years. Required: 1. Calculate each year's absorption costing net operating income. Present your answer in the form of a reconciliation report 2. Assume in Year 4 that the company's variable costing net operating income was $984,400 and its absorption costing net operating income was $1,012,400. a. Did inventories increase or decrease during Year 4? b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 42