Using the information provided, prepare condensed, three-year comparative income statements using the variable-costing method. Waterways Continuing Problem-8 (Part Level Submission) When Waterways' management met to review the year-end financial statements, the room was WATERWAYS CORPORATION filled with excitement. Sales had been exceptional during the year and every department had Variable Costing Income Statement exceeded the budget and last year's sales totals. Several years ago Waterways had implemented a For the years ending December 31 bonus system based on percentage of sales over budget, and the managers were expecting healthy cheques at the end of the year. 2014 2015 2016 $ $ 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 last three years. Production on this line began on January 1, 2014: 2014 2015 2016 Beginning inventory of finished units Production in units 66,000 70,125 51,000 Sales in units 56,000 60,125 71,000 Selling price $29 $29 $31 Direct material $3 $3 $4 Direct labour Variable manufacturing overhead UI A Variable selling and administration Fixed manufacturing overhead 561,000 561,000 561,000 Fixed selling and administration 140,000 140,000 140,000 Waterways uses the absorption-costing method and accounts for inventory using FIFO. Reconcile the variable-costing income with the absorption-costing income calculated in part (a). 2014 2015 2016 Variable costing income Add: Deferred fixed manufacturing overhead Less: Released fixed manufacturing overhead Absorption costing income