Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for mu
ID: 2589539 • Letter: J
Question
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 shareholders, creditors, and the government. The company has provided the following data:
2.
Determine each year’s absorption costing net operating income.
3.
In Year 4, the company’s variable costing net operating income was $249,800 and its absorption costing net operating income was $273,300.
How much fixed manufacturing overhead cost was deferred in or released from inventory during Year 4?
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 shareholders, creditors, and the government. The company has provided the following data:
Explanation / Answer
1 Year 1 Year 2 Year 3 Beginning inventory 202 152 183 Ending inventory 152 183 240 Change in inventory -50 31 57 Variable costing net operating income $291,900 $277,800 $250,100 Add:Fixed manufacturing overhead 17639 32433 cost deferred in inventory (31*569) (57*569) Less:Fixed manufacturing overhead 28450 cost released from inventory (50*569) Absorption costing net operating income $263,450 $295,439 $282,533 2 a. Absorption costing net operating income > Variable costing net operating income=Increase in inventory (Refer part 1) b. Fixed manufacturing overhead cost deferred in inventory=Absorption costing net operating income - Variable costing net operating income Fixed manufacturing overhead cost deferred in inventory=273300 -249800=23500
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