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Waterways 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.
Waterways 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 year's 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. $31 $33 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 2018 2019 2020 0 70,000 77,000 53,900 60,000 67,000 73,900 $31 4 4 5 3 3 4. 5 5 6 $539,000 $539,000 $539,000 140,000 140,000 140,000 5 6 Waterways uses the absorption-costing method and accounts for inventory using FIFO. Using the information provided, prepare condensed, three-year comparative income statements using the variable-costing method. WATERWAYS CORPORATION Variable-Costing Income Statement For the Years Ended December 31 2018 2019 2020 Sales 1,860,000 2,077,000 2,438,700 Variable Costs Cost of Goods Sold 4 Beginning Inventory 120,000 240000 Cost of Goods Manufactured 840,000 924000 754600 T Cost of Goods Available for Sale 840,000 1044000 994600 Less Ending Inventory 120,000 240000 720,000 804000 994600 Il Selling and Administration 360000 402000 443400 T Total Variable Costs - 1080000 1206000 1438000 Contribution Margin- 780000 871000 1,000,700 Less #1 Fixed Costs 679000 679000 679000 Operating Income / (Loss) - 101000 192000 321700 Reconcile the variable-costing income with the absorption-costing income calculated in part (a). 2018 2019 2020 Variable-costing income 101000 192000 321700 X Deferred fixed manufacturing overhead 50861 Released fixed manufacturing overhead 140000 Absorption-costing income 151861 272000 181700 Your answer is partially correct. Try again. 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 0 decimal places, e.g. 125.) WATERWAYS CORPORATION Absorption-Costing Income Statement For the Years Ended December 31 2018 2019 2020 sales 1,860,000 2,077,000 2,438,700 Cost of Goods Sold Beginning Inventory 180,000 380,000 Beginning Inventory Ada 3). (Cost of Goods Manufactured 1403000 1463000 1293600 Cost of Goods Available for Sale 1403000 1643000 1673600 Less ). Ending inventory Less 1. Ending Inventory 194861 380000 1208139 1263000 1673600 Gross Margin 651861 814000 765100 Selling and Administration Expenses 500000 542000 583400 Operating Income / (Loss) 151861 272000 181700 |x Your answer is incorrect. Try again. Assume that Waterways uses a normal-costing method. The company had budgeted 70,000 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 x Volume variances Waterways 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 year's 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. $31 $33 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 2018 2019 2020 0 70,000 77,000 53,900 60,000 67,000 73,900 $31 4 4 5 3 3 4. 5 5 6 $539,000 $539,000 $539,000 140,000 140,000 140,000 5 6 Waterways uses the absorption-costing method and accounts for inventory using FIFO. Using the information provided, prepare condensed, three-year comparative income statements using the variable-costing method. WATERWAYS CORPORATION Variable-Costing Income Statement For the Years Ended December 31 2018 2019 2020 Sales 1,860,000 2,077,000 2,438,700 Variable Costs Cost of Goods Sold 4 Beginning Inventory 120,000 240000 Cost of Goods Manufactured 840,000 924000 754600 T Cost of Goods Available for Sale 840,000 1044000 994600 Less Ending Inventory 120,000 240000 720,000 804000 994600 Il Selling and Administration 360000 402000 443400 T Total Variable Costs - 1080000 1206000 1438000 Contribution Margin- 780000 871000 1,000,700 Less #1 Fixed Costs 679000 679000 679000 Operating Income / (Loss) - 101000 192000 321700 Reconcile the variable-costing income with the absorption-costing income calculated in part (a). 2018 2019 2020 Variable-costing income 101000 192000 321700 X Deferred fixed manufacturing overhead 50861 Released fixed manufacturing overhead 140000 Absorption-costing income 151861 272000 181700 Your answer is partially correct. Try again. 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 0 decimal places, e.g. 125.) WATERWAYS CORPORATION Absorption-Costing Income Statement For the Years Ended December 31 2018 2019 2020 sales 1,860,000 2,077,000 2,438,700 Cost of Goods Sold Beginning Inventory 180,000 380,000 Beginning Inventory Ada 3). (Cost of Goods Manufactured 1403000 1463000 1293600 Cost of Goods Available for Sale 1403000 1643000 1673600 Less ). Ending inventory Less 1. Ending Inventory 194861 380000 1208139 1263000 1673600 Gross Margin 651861 814000 765100 Selling and Administration Expenses 500000 542000 583400 Operating Income / (Loss) 151861 272000 181700 |x Your answer is incorrect. Try again. Assume that Waterways uses a normal-costing method. The company had budgeted 70,000 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 x Volume variances
