Arcade Away manufactures video games that it sells for $44 each. The company uses a fixed manufacturing overhead allocation rate of $5 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: E: (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 November 2018 Absorption Variable Variable costing 18 $ costing Absorption costing 18 $ costing 13 Total product cost per game 13 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 Operating Income Data Table October 1,600 units 2,700 units November 3,000 units 2,700 units 13 7 $ Sales Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs 13 $ 7 13,500 8,500 13,500 8,500 Print Done - Requirements 1. Compute the product cost per game produced under absorption costing and under variable costing. 2. Prepare monthly income statements for October and November, including columns for each month and a total column, using these costing methods: a. absorption costing. b. variable costing. 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. 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. Print Done