GameDepot manufactures video games that it sells for $ 43 each. The company uses a fixed manufacturing overhead allocation rate of $ 4

per game. Assume all costs and production levels are exactly as planned.

Compute the product cost per game produced under absorption costing and under variable costing.

2.

Prepare monthly income statements for

OctoberOctober

and

NovemberNovember,

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

OctoberOctober?

In

NovemberNovember?

Explain the pattern of differences in operating income based on absorption costing versus variable costing.

4.

Determine the balance in Finished Goods Inventory on

OctoberOctober

3131

and

NovemberNovember

3030

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.