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: year 1 year 2 year 3 inventories beginning (units) 210 160 190 ending (units) 160 190 230 variable costing net operating income $290,000 $279,000 $260,000 the company’s fixed manufacturing overhead per unit was constant at $560 for all three years. rev: 03_09_2019_qc_cs-162392 required: 1. calculate each year’s absorption costing net operating income. (enter any losses or deductions as a negative value.)

Year 1:  262,000

Year 2:  295,800

Year 3:  285,760

Explanation:

Under variable costing the fixed cost are deducted entirely in the income statement.

Under absorption the fied cost are capitalized therefore; a portion of them is contained within the ending inventory and when the company sales the beginning invneotry is "paying" the fixed cost of the previous year

Thus, a positive difference increase the income as less fixed incoem is declared as expense

and a negative difference (decrease in inventories) decrease the income as fixed cost from other period are into the curret year period

Year 1

variable operating income:              290,000

Fixed cost absorp on inventory

(160-210) x 560  = -50x560 =           (28,000)      

Absorption operating net income:  262,000

Year 2

variable operating income:              279,000

Fixed cost absorp on inventory

(190-160) x 560  = 30x560 =              16,800  

Absorption operating net income:  295,800

Year 3

variable operating income:              260,000

Fixed cost absorp on inventory

(230-190) x 560  = 40x560 =              25,760  

Absorption operating net income:   285,760

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