Knox Corporation manufactures an item. The cost structure is:

Variable cost per unit

$\frac{\text{M}\text{a}\text{n}\text{u}\text{f}\text{a}\text{c}\text{t}\text{u}\text{r}\text{i}\text{n}\text{g}}{\text{\$}100}$

$\frac{\text{S}\text{e}\text{l}\text{l}\text{i}\text{n}\text{g}\frac{?}{?}\text{\&}\text{A}\text{d}\text{m}\text{i}\text{n}\text{i}\text{s}\text{t}\text{r}\text{a}\text{t}\text{i}\text{v}\text{e}}{\text{\$}30}$

$$203,000$

$$800,000$

In its first year of operations, Knox Corporation produced $70,000$ items and sold $64,000$ at $$200$ each.

Part $1$: What is the contribution margin at the end of the first year of operations under the variable costing method?

Part $2$: Which costing method $($variable or absorption$)$ will generate a higher net operating income in Knox Corporation's first year of operations and by how much? Hint: See page $6-21$ Illustration $6$A$-5$ for Variable Costing model and page $6-20$ Illustration $6$A$-4$ for guidance on Absorption Costing model.