Arcade Away manufactures video games that it sells for $42 each. The company uses a fixed manufacturing overhead allocation rate of $4 per game. Assume all costs and production levels are exactly as planned. The following data are from Arcade Away's first two months in business during 2018: (Click the icon to view the data.) Read the requirements Requirement 1. Compute the product cost per game produced under absorption costing and under variable costing October 2018 Absorption Variable costing costing November 2018 Absorption Variable oosting costing Total product cost per game Data Table Requirement 2a. Prepare monthly income statements for October and November, including columns for each month and a total column, using absorption costing. Arcade Away Absorption Costing Income Statement October 2018 November 2018 Total October 1.400 units 2.500 units 12 $ $ Sales Production Variable manufacturing cost per game Sales commission cost per game Total fored manufacturing overhead Totalfioved selling and administrative costs November 2.700 units 2.500 units 12 7 10,000 7,500 7 10,000 7.500 Operating Income Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Arcade Away Variable Costing Income Statement October 2018 November 2018 Total Print Done Operating Income Requirement 3. Is operating income higher under absorption costing or variable costing in October? In November? Explain the pattern of differences in operating income based on absorption costing versus variable costing. In October, the operating income is higher under costing. The primary reason for this is that are distributed across the entire production run as part of the unit cost. Under the absorption costing method, $ of fixed manufacturing overhead costs are In November, the operating income is higher under costing. The primary reason for this is because $ of fixed manufacturing overhead that is contained in the units in ending inventory under As inventory as was the case in November October's costs that absorption costing assigned to that inventory are expensed in This November's absorption costing income Requirement 4. Determine the balance in Finished Goods Inventory on October 31 and November 30 under absorption costing and variable costing. Compare the differences in inventory balances and the differences in operating income. Explain the differences in inventory balances based on absorption costing versus variable costing. October 31, 2018 November 30, 2018 Absorption Variable Absorption Variable costing costing costing costing Finished Goods Inventory The higher inventory balance under is representative of the Under absorption costing, the difference in the product cost per game is whereas under variable costing, the difference in the product cost per game is Arcade Away manufactures video games that it sells for $42 each. The company uses a fixed manufacturing overhead allocation rate of $4 per game. Assume all costs and production levels are exactly as planned. The following data are from Arcade Away's first two months in business during 2018: (Click the icon to view the data.) Read the requirements Requirement 1. Compute the product cost per game produced under absorption costing and under variable costing October 2018 Absorption Variable costing costing November 2018 Absorption Variable oosting costing Total product cost per game Data Table Requirement 2a. Prepare monthly income statements for October and November, including columns for each month and a total column, using absorption costing. Arcade Away Absorption Costing Income Statement October 2018 November 2018 Total October 1.400 units 2.500 units 12 $ $ Sales Production Variable manufacturing cost per game Sales commission cost per game Total fored manufacturing overhead Totalfioved selling and administrative costs November 2.700 units 2.500 units 12 7 10,000 7,500 7 10,000 7.500 Operating Income Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Arcade Away Variable Costing Income Statement October 2018 November 2018 Total Print Done Operating Income Requirement 3. Is operating income higher under absorption costing or variable costing in October? In November? Explain the pattern of differences in operating income based on absorption costing versus variable costing. In October, the operating income is higher under costing. The primary reason for this is that are distributed across the entire production run as part of the unit cost. Under the absorption costing method, $ of fixed manufacturing overhead costs are In November, the operating income is higher under costing. The primary reason for this is because $ of fixed manufacturing overhead that is contained in the units in ending inventory under As inventory as was the case in November October's costs that absorption costing assigned to that inventory are expensed in This November's absorption costing income Requirement 4. Determine the balance in Finished Goods Inventory on October 31 and November 30 under absorption costing and variable costing. Compare the differences in inventory balances and the differences in operating income. Explain the differences in inventory balances based on absorption costing versus variable costing. October 31, 2018 November 30, 2018 Absorption Variable Absorption Variable costing costing costing costing Finished Goods Inventory The higher inventory balance under is representative of the Under absorption costing, the difference in the product cost per game is whereas under variable costing, the difference in the product cost per game is