Jorgansen Lighting, Incorporated, manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing...

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Accounting

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:

Year 1 Year 2 Year 3

Inventories

Beginning (units) 200 170 190

Ending (units) 170 190 240

Variable costing net operating income $ 300,000 $ 279,000 $ 260,000

The companys fixed manufacturing overhead per unit was constant at $570 for all three years.

	Year 1	Year 2	Year 3
Inventories
Beginning (units)	200	170	190
Ending (units)	170	190	240
Variable costing net operating income	$ 300,000	$ 279,000	$ 260,000

Exercise 4-3 (Algo) Part 2

2. Assume in Year 4 that the companys variable costing net operating income was $250,000 and its absorption costing net operating income was $300,000.

Did inventories increase or decrease during Year 4?
How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?

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