Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $30. The variable costs of production for one case of cans are as follows: Direct material Direct labor Variable manufacturing overhead $ 7.00 2.00 6.50 $15.50 Total variable manufacturing cost per case Variable selling and administrative costs amount to $0.90 per case. Budgeted fixed manufacturing overhead is $588,000 per year, and fixed selling and administrative cost is $42,500 per year. The following data pertain to the company's first three years of operation Planned production (in units) Finished-goods inventory (in units), January 1 Actual production (in units) Sales (in units) Finished-goods inventory (in units), December 31 Year 1 Year 2 Year 3 84,000 84, 000 84,000 0 25,000 84,000 84,000 84,000 84,000 59,000 96,500 0 25,000 12,500 Actual costs were the same as the budgeted costs Required 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using a. Absorption costing b. Variable costing years of operation. Use the shortcut method and the company ends the year with no inventory on hand a. What will be the difference between absorption-costing income and variable-costing income in year 4? 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing