Requlred Information

Exercise $7-3($Static$)$ Reconciliation of Absorption and Varlable Costing Net Operating Incomes $[$LO$7-3]$

$[$The following information applies to the questions displayed below.$]$

Jorgansen Lighting, Incorporated, 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:

Inventories:

Beginning $($units$)$

Ending $($units$)$

Variable costing net operating income

Year $1$

$200170$ $$1,080,400$

Year $2$

$170180$ $$1,032,400$

Year $3$

$180220$ $$996,400$

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

Exercise $7-3($Static$)$ Part $2$

$2.$ 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 $4?$

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 $4$