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 first three years, Stuart Weil, president of Smart Safety commented, "I was told by our accountants-and in fact, I have memorized-that our breakeven volume is 49,000 units. I was happy that we reached that sales goal in each of our first two years. But, here's the strange thing. In our first 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 or rate Requirement 1. 1. What denominator level is Smart Safety using to allocate fixed 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 briefly. 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. 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 first, and then complete Requirement 4. Reconcile the operating incomes under variable costing and absorption costing for each year. (Enter a "D" for any zero amounts. Use parentheses or a minus sign for negative differences.) comprehensive income. 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 first three years, Stuart Weil, president of Smart Safety commented, "I was told by our accountants-and in fact, I have memorized-that our breakeven volume is 49,000 units. I was happy that we reached that sales goal in each of our first two years. But, here's the strange thing. In our first 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 or rate Requirement 1. 1. What denominator level is Smart Safety using to allocate fixed 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 briefly. 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. 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 first, and then complete Requirement 4. Reconcile the operating incomes under variable costing and absorption costing for each year. (Enter a "D" for any zero amounts. Use parentheses or a minus sign for negative differences.) comprehensive income