Problem - 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 hours-the 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 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 - $24,750

Variable factory overhead - $153,450

Direct labour hours (used in WIP) - 24,750

Direct labour costs (used in FG) - $148,500

In 2015 and 2016, the actual direct labour hours used was 20,700 and 23,700, respectively. Raw materials put into production were $291,900 in 2015 and $370,600 in 2016. The actual fixed overhead was $42,700 for 2015 and $28,260 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.

Prepare an incremental analysis to determine if Current Designs should purchase the new rotomould oven, assuming that the average price for natural gas over the next 10 years will be $0.70 per therm.

For the year ended December 31, 2016, prepare a revised income statement for Daniels Tool & Die Corporation using the variable-costing method.