FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Exercise 6-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3]
(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
Year 1
Inventories
Beginning (units)
Ending (units)
190
230
Variable costing net operating income
$ 250,000
The company's fixed manufacturing overhead per unit was constant at $570 for all three years.
O Increase
O Decrease
200
170
$ 200,000
Year 3
170
190
$ 269,000
Exercise 6-3 (Algo) Part 2
2. Assume in Year 4 that the company's variable costing net operating income was $260,000 and its absorption costing net operating
income was $290,000
a. Did inventories increase or decrease during Year 4?
b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
Fleed manufacturing overhead cost
inventory during Year A
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Transcribed Image Text:Required information Exercise 6-3 (Algo) Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3] (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 Year 1 Inventories Beginning (units) Ending (units) 190 230 Variable costing net operating income $ 250,000 The company's fixed manufacturing overhead per unit was constant at $570 for all three years. O Increase O Decrease 200 170 $ 200,000 Year 3 170 190 $ 269,000 Exercise 6-3 (Algo) Part 2 2. Assume in Year 4 that the company's variable costing net operating income was $260,000 and its absorption costing net operating income was $290,000 a. Did inventories increase or decrease during Year 4? b. How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4? Fleed manufacturing overhead cost inventory during Year A
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