Answer:
<u>Year 1</u>
Fixed Overhead in ending inventory = (2,200 * $1.20) = $2,640
<u>Year 2
</u>
Fixed Overhead in ending inventory = (1,700 * $1.20) = $2,040
Fixed overhead in beginning inventory = (2,200 * $1.20) = $2,640
<u>Year 3</u>
Fixed Overhead in ending inventory = (1,800 * $1.20) = $2,160
Fixed overhead in beginning inventory = (1,700 * $1.20) = $2,040
                      Absorption costing income
Particulars                                                    Year 1         Year 2       Year 3
Variable costing income                           $140,000     $146,400   $143,950
Fixed Overhead in ending inventory        $2,640        $2,040       $2,160
Fixed overhead in beginning inventory    $0               ($2,640)     ($2,040)
Absorption costing income                      $142,640   $145,800  $144,070