Hi, could i please have explanation for this question. Thank you.

The Daniels Tool & Die Corporation has been in existence for a little over three years. The company's sales

have been increasing each year as it builds a reputation. The company manufactures dies to its customers'

specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on

direct labour hoursthe absorption-costing (full) method. Overapplied or underapplied overhead is treated

as an adjustment to Cost of Goods Sold. The company's income statements and other data for the last two

years are as follows:

DANIELS TOOL & DIE CORPORATION

2015-2016 Comparative Income Statements

2015 2016

Sales $835,500 $1,015,300

Cost of goods sold

Finished goods, January 1 24,800 17,500

Cost of goods manufactured 546,600 651,500

Total available 571,400 669,000

Finished goods, December 31 17,500 13,100

Cost of goods sold before overhead adjustment 553,900 655,900

Underapplied factory overhead 35,600 14,000

Cost of goods sold 589,500 669,900

Gross profit 246,000 345,400

Selling expenses 81,800 94,100

Administrative expenses 69,000 74,800

Total operating expenses 150,800 168,900

Operating income $95,200 $176,500

Daniels Tool & Die Corporation Inventory Balances

January 1, 2015 December 31, 2015 December 31, 2016

Raw material $21,200 $29,300 $10,300

Work in process $40,300 $47,000 $63,200

Direct labour hours (used in WIP) 1,360 1,620 2,090

Finished goods $24,800 $17,500 $13,100

Direct labour hours (used in FG) 1,490 1,100 810

Daniels used the same predetermined overhead rate in applying overhead to its production orders in both

2015 and 2016. The rate was based on the following estimates:

Fixed factory overhead $24,500

Variable factory overhead $151,900

Direct labour hours (used in WIP) 24,500

Direct labour costs (used in FG) $147,000

In 2015 and 2016, the actual direct labour hours used were 20,600 and 23,100, respectively. Raw materials

put into production were $291,400 in 2015 and $370,300 in 2016. The actual fixed overhead was $43,000

for 2015 and $29,580 for 2016, and the planned direct labour rate was the direct labour achieved.

For both years, all of the administrative costs were fixed. The variable portion of the selling expenses results

from a 5% commission that is paid as a percentage of the sales revenue.

(a)

For the year ended December 31, 2016, prepare a revised income statement for Daniels Tool & Die

Corporation using the variable-costing method.