aterways Continuing Problem 8 a1, b1, c

When Waterways management met to review the year-end financial statements, the room was filled with excitement. Sales had been exceptional during the year and every department had exceeded the budget and last years sales totals. Several years ago, Waterways had implemented a bonus system based on percentage of sales over budget, and the managers were expecting healthy cheques at the end of the year. Yet the plant manager, Ryan Smith, was stunned into silence when he read the bottom line on the income statement for manufacturing operations. It was showing a loss! He immediately approached the CFO asking for an explanation. Ryan wondered, Why did we go through all that trouble and inconvenience to adopt those cost-cutting measures when they had the opposite effect? One of those measures was to move toward lean manufacturing. The CFO retrieved the following information with respect to the top-selling line from the manufacturing operations for the past three years. Production on this line began on January 1, 2018.

2019 2020 2018 0 86,000 76,000 $29 103,200 95,200 $29 72,240 90,240 $31 Beginning inventory of finished units Production in units Sales in units Selling price Direct materials Direct labour Variable manufacturing overhead Variable selling and administration Fixed manufacturing overhead Fixed selling and administration 2 $722,400 $722,400 $722,400 120,000 120,000 120,000 Waterways uses the absorption-costing method and accounts for inventory using FIFO. Using the information provided, recreate Waterways' statements for this division using condensed, three-year comparative income statements. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to O decimal places, e.g. 125.) WATERWAYS CORPORATION Absorption-Costing Income Statement For the Years Ended December 31 2018 2204000 2019 2760800 Sales $ 2020 2797440 $ Cost of Goods Sold : Beginning Inventory 174000 Add : Cost of Goods Manufactured Cost of Goods Available for Sale Less : Ending Inventory Gross Margin Selling and Administration Expenses Operating Income / (Loss) LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Using the information provided, prepare condensed, three-year comparative income statements using the variable-costing method. WATERWAYS CORPORATION Variable-Costing Income Statement 2018 2019 2020 Reconcile the variable-costing income with the absorption-costing income calculated in part (a). 2018 2019 2020 Variable-costing income Deferred fixed manufacturing overhead Released fixed manufacturing overhead Absorption-costing income LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Assume that Waterways uses a normal-costing method. The company had budgeted 86,000 units of production for each of the three years. Calculate the volume variance for each year, indicating if it is favourable or unfavourable. 2018 2019 2020 Volume variances 5 LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT