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:

	Year 1	Year 2	Year 3
Inventories
Beginning (units)	210	150	180
Ending (units)	150	180	240
Variable costing net operating income	$290,000	$269,000	$250,000

The company’s fixed manufacturing overhead per unit was constant at $500 for all three years.

Assume in Year 4 that the company’s variable costing net operating income was $250,000 and its absorption costing net operating income was $280,000.

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

Answer 1