CH 6 HW Question 4, PM6-28A (similar to) Part 4 of 9 HW Score: 60%, 6 of 10 points Points: 0 of 4 Save Game Time manufactures video games that it sells for $37 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 Game Time's first two months in business: (Click the icon to view the data.) Read the requirements. October November Total Net Sales Revenue $ 44,400 $ 103,600 $ 148,000 Data table Cost of Goods Sold 19,200 44,800 64,000 Gross Profit 25,200 58,800 84,000 Selling and Administrative Costs 13,600 18,400 32,000 Operating Income 11,600 $ 40,400 $ 52,000 Sales Requirement 2b. Prepare monthly income statements for October and November, including columns for each mont Operating Income Game Time Variable Costing Income Statement October November Total elp me solve this Etext pages Get more help - - X October Production 1,200 units 2,700 units November 2,800 units 2,700 units Variable manufacturing cost per game 11 $ 11 Sales commission cost per game 3 3 Total fixed manufacturing overhead 13,500 Total fixed selling and administrative costs 10,000 13,500 10,000 Print Done Clear all Check answer 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. costing. The primary reason for this is that In October, the operating income is higher under absorption in absorption costing, the fixed manufacturing overhead costs run as part of the unit cost. Under the absorption costing method, not expensed and remain in Finished Goods Inventory. $ 2,500 are distributed across the entire production of fixed manufacturing overhead costs are In November, the operating income is higher under variable costing. The primary reason for this is because $ 500 of fixed manufacturing overhead that is contained in the units in ending inventory under absorption costing is not contained in the units of ending inventory under variable costing. declines, as was the case in November, October's fixed manufacturing overhead As inventory costs that absorption costing assigned to that inventory are expensed in absorption costing income. November. This decreases November's 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 November 30 Absorption costing Variable Absorption Variable costing costing costing Finished Goods Inventory 9,000 $ 6,500 7,200 $ 5,200