Needham Games manufactures video games that it sells for $ $38$$$38$ each. The company uses a fixed manufacturing overhead allocation rate of $ $5$$$5$ per game. Assume all costs and production levels are exactly as planned. The following data are from Needham Games'Needham Games' first two months in business:View the data. LOADING...Read the requirements. LOADING...Question content area bottomPart $1$Requirement $1.$ Compute the product cost per game produced under absorption costing and under variable costing. October November AbsorptionVariable AbsorptionVariable costingcosting costingcostingTotal product cost per game Part $2$Requirement $2$a$.$ Prepare monthly income statements for OctoberOctober and NovemberNovember, including columns for each month and a total column, using absorption costing.Needham GamesAbsorption Costing Income Statement OctoberNovemberTotal Operating Income Part $3$Requirement $2$b$.$ Prepare monthly income statements for OctoberOctober and NovemberNovember, including columns for each month and a total column, using variable costing.Needham GamesVariable Costing Income Statement OctoberNovemberTotal Operating Income Part $4$Requirement $3.$ 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.In October, the operating income is higher under costing. The primary reason for this is that are distributed across the entire productionrun as part of the unit cost. Under the absorption costing method, of fixed manufacturing overhead costs are Part $5$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'sabsorption costing income. Part $6$Requirement $4.$ 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. October $31$ November $30$ AbsorptionVariable AbsorptionVariable costingcosting costingcostingFinished Goods Inventory Part $7$The higher inventory balance under absorption costingvariable costing is representative of the fixed costs that are expensed in absorption costing, but contained in inventory under variable costing.fixed costs that are expensed in variable costing, but contained in inventory under absorption costing. Under absorption costing, the difference in the product cost per game is contained in the inventoryexpensed as a period cost, whereas under variable costing, the difference in the product cost per game is contained in the inventoryexpensed as a period cost.The higher inventory balance underis representative of theis representative of theUnder absorption costing, the difference in the product cost per game isUnder absorption costing, the difference in the product cost per game is$,$ whereas under variable costing, the difference in the product cost per game is$,$ whereas under variable costing, the difference in the product cost per game is$.$