Game Time manufactures video games that it sells for $39 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 Game Time's first two months in business during 2018: (Click the icon to view the data.) Read the requirements. .. Data table Requirement 1. Compute the product cost per game produced under absorption costing and under variable costing. October November November 2018 Sales 1,400 units 2,500 units Variable October 2018 Absorption Variable costing costing $ 19 $ 15 2,200 units Absorption costing $ 19 $ costing 2,200 units 15 $ $ 15 Total product cost per game 15 Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs 7 7 Requirement 2a. Prepare monthly income statements for October and November, including columns for each month and a total column, using absorption costing. 8,800 8,800 7,500 7,500 Game Time Absorption Costing Income Statement October 2018 November 2018 $ $ 54,600 $ 97,500 $ 26,600 47,500 Total Net Sales Revenue 152, 100 74,100 Print Done Cost of Goods Sold Gross Profit 28.000 78,000 50,000 25,000 Selling and Administrative Costs 17,300 42,300 $ 10,700 $ 25,000 $ 35,700 Operating Income Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Game Time Variable Costing Income Statement October 2018 November 2018 $ 54,600 $ 97,500 $ 30,800 55,000 Net Sales Revenue Total 152,100 85,800 Variable Costs Contribution Margin 23,800 16.300 42.500 16,300 66,300 32,600 Fixed Costs $ 7,500 26,200 33,700 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 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. costing. The primary reason for this is that are distributed across the entire production of fixed manufacturing overhead costs are 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 casting October 31, 2018 November 30, 2010 Absorption Variable Absorption Variable costing costing costing costing Finished Goods Inventory Under absorption costing the difference in the product cost per game is The higher inventory balance under absorption costing is representative of the whereas under variable costing the difference in the product cost per game is