Requirement 1. 1. What denominator level is Smart Safety using to allocate xed manufacturing costs to the bicycle helmets? 2. How is Smart Safety disposing of any favourable or unfavourable production-volume variance at the end of the year? Explain your answer briey. Requirement 2. How did Smart Safety's accountants arrive at the breakeven volume of 49,000 units? Determine the formula, and then calculate how Smart Safety's accountants would arrive at the breakeven volume of 49,000 units. Breakeven / = quantity 2020 / = 202 1 / = 2022 / PmMemZ: Smart Safety, a three-year-old company, has been producing and selling a single type of bicycle helmet. Smart Safety uses standard costing. After reviewing the statements of comprehensive income for the rst three years, Stuart Weil, president of Smart Safety commented, \"I was told by our accountantsand in fact, I have memorizedthat our breakeven volume is 49,000 units. l was happy that we reached that sales goal in each of our rst two years. But, here's the strange thing. In our rst year, we sold 49,000 units and indeed we broke even. Then, in our second year, we sold the same volume and had a positive operating income. I didn't complain, of course. . . but here's the bad part. In our third year, we sold 20% more helmets, but our operating income fell by more than 80% relative to the second year! We didn't change our selling price or cost structure over the past three years and have no price, efficiency, or rate variances . . . so what's going on?!" Using Exhibit 1 below, answer the following questions: Absorption Costing Income Statement Exhibit 1: 2020 2021 2022 Salesmanm Revenues m Cost of goods sold: Beginning inventory 0 0 372,400 Production 1,862,000 2,234,400 1,862,000 Available for sale m Deduct ending inventory 0 (372,400) 0 Adjustment for production-volume variance 0 (225,400) 0 Cost of goods sold m Gross margin m Selling and administrative expenses (all xed) 196,000 196,000 196,000 Operating income $ 0 $ 225,400 39,200 Beginning inventory (units) 0 0 9,800 Production (units) 49,000 58,800 49,000 Sales (units) 49,000 49,000 58,800 Ending inventory 0 9.800 0 Variable manufacturing cost per unit $ 15 $ 15 $ 15 Fixed manufacturing overhead costs $ 1,127,000 $ 1,127,000 $ 1,127,000 Fixed manuf. costs allocated per unit produced $ 23 $ 23 $ 23 Requirement 3. Prepare a variable costing-based statement of comprehensive income for each year. Complete the top half of the statement of comprehensive income for each year rst, and then complete the bottom portion. (Enter a "0" for any zero amounts.) 2020 2021 2022 Sales (units) Revenues Variable cost of goods sold Beginning inventory Variable manufacturing costs Deduct ending inventory Variable cost of goods sold Part 6 Contribution margin Fixed manufacturing costs Fixed selling and administrative costs Operating income Explain the variation in the variable costing operating income for each year based on contribution margin per unit and sales volume by completing the following table. (Enter a "0" for any zero amounts.) 2020 2021 2022 Contribution margin Total xed costs Operating income Operating mcome 264600 Requirement 4- Reconcile the operating incomes under variable costing and absorption costing for each year. (Enter a "0" for any zero amounts. Use parentheses or a minus sign for negative differences.) Reconciliation of absorption/variable costing operating income 2020 2021 2022 (1) Absorption costing operating income (2) Variable costing operating income (3) Difference (1) - (2) Fixed manufacturing costs in ending inventory (4) (Absorption) Fixed manufacturing costs in beginning inventory (5) (Absorption) (6) Difference (4) - (5) Use the reconciliation table you completed above to explain to Stuart Weil the positive operating income in 2021 and the drop in operating income in 2022 that is shown on the absorption costing statement of comprehensive income. Problem 3: O hp