Sugarplum uses standard costing to produce a particularly popular type of candy. Sugarplum's. President, Jack MoCloud was unhappy after reverwing the income stafements for the first each of our first 2 years. But here's the strange thing. In our first year, we sold 25,000 units and indeed we broke even. Then, in our second year we sold the same volume and had 90% from what it was in the second yeart We didnt change our selling price or cost structure over the past 3 years and have no price, efficency, or spending variances... so whurts going on?" (Click the icon to view the nhsorption costing income statements for the throe years) Read the reguirnments. Requirement 1. What denominator level is Sugarplum using to allocate fixed manulacturing costs to the candy? How is Sugarpiun treating any farvorible or unfavorable production-volume variance at the end of the year? Explain your answer briofly. The denominator lavel used to allocate fixed manulacturing costs is units: Data table 5.000 units. I was happy that we reached h. our second yoar we sold the same voly pore candy, but our operating income dro o price, efficiency, or spending variances Sugarplum uses standard costing to produce a particularly popular type of candy. Sugarplum's President; Jack MoCloud was unhappy after reviewing the incom 3 years of business. He said, T was told by our accountants - and in fact, I have memorized-that our breakeven wolume is 25,000 units. I was happy that we rs each of our first 2 years. But here's the strange thing: In our first year, we sold 25,000 units and indeed we broke even. Then, in our second year we sold the sar a signficant, positive operating income. I didn't complain, of course. . . but here's the bad part. In our third yoar, we sold 20% more candy, but our operabing incor 90% from what it was in the second yeart We didn't change our selling price or cost structure over the past 3 years and have no price, efficiency, or spending var going on?" III (Click the icon to view the absorption costing income statements for the three years.) Read the requirements. Requirement 1. What denominator level is Sugarplum using to allocate fixed manufacturing costs to the candy? How is Sugarplum treating any tavorable or unfavorable production-volume variance at the end of the year? Explain your answer briefly. Requirements 1. What denominator level is Sugarplum using to allocate fixed manulacturing costs to the candy? How is Sugarplum treating any favorable or unfaworable production-volume variance at the end of the year? Explain your answer briefly. 2. How did Sugarplum's accountants arrive at the breakeven volume of 25,000 units? 3. Prepare a variable costing-based income statement for each year. Explain the variation in the variable costing operating income for each year based on contribution margin per unit and sales volume. 4. Reconcile the operating incomes under variable costing and absorption costing for each year, and use this information to explain to Jack McCloud the positive operating income in 2020 and the drop in operating income in 2021