Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $50. The variable costs of production for one case of cans are as follows:

Direct material	$	15
Direct labor		5
Variable manufacturing overhead		12
Total variable manufacturing cost per case	$	32

Variable selling and administrative costs amount to $1 per case. Budgeted fixed manufacturing overhead is $800,000 per year, and fixed selling and administrative cost is $75,000 per year. The following data pertain to the companys first three years of operation.

	Year 1	Year 2	Year 3
Planned production (in units)	80,000			80,000			80,000
Finished-goods inventory (in units), January 1	0			0			20,000
Actual production (in units)	80,000			80,000			80,000
Sales (in units)	80,000			60,000			90,000
Finished-goods inventory (in units), December 31	0			20,000			10,000

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.