Play TimePlay Time

manufactures video games that it sells for

$ 43$43

each. The company uses a fixed manufacturing overhead allocation rate of

$ 4$4

per game. Assume all costs and production levels are exactly as planned. The following data are from

Play TimePlay Time's

first two months in business during

20162016:

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requirements

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Requirement 1. Compute the product cost per game produced under absorption costing and under variable costing.

				October 2016
				Absorption	Variable
				costing	costing
Total product cost per game				$16	$12
	November 2016
	Absorption	Variable
	costing	costing
	$16	$12

Requirement 2a. Prepare monthly income statements for

OctoberOctober

and

NovemberNovember,

including columns for each month and a total column, using absorption costing.

Play Time
Absorption Costing Income Statement
	October 2016	November 2016	Total
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling and Administrative Costs

	October		November
Sales	2,000	units	2,900	units
Production	2,800	units	2,800	units
Variable manufacturing cost per game	$12		$12
Sales commission cost per game	6		6
Total fixed manufacturing overhead	11,200		11,200
Total fixed selling and administrative costs	9,000		9,000