Play Zane manufactures video games that it sells for 341 each. The company uses a fixer manufacturing overhead allocation rate of S4 per game. Assure all costs and production levels are exactly as pilarned. The following data are from Play Zane's first two months in business during 2018: Click the loon to view the data) Read the requirements Requirement 1. Compute the product cost per game produced under absorption costing and under variable costing. October 2018 November 2018 Absorption Variable Absorption Variable costing costing costing cosling Total product cost per game Requirement 2a. Prepare monthly income statements for October and November, including columns for each month and a total column, using absorption costing. Play Zone Absorption Costing Income Statement October 2018 November 2018 Total T Contribution Margin Cast of Goods Sald Fixed Costs Gross Profit Net Salns Revenue Seling and Administrative Costs Variable Cosis ome statements for October and November, including columns for each month and a total column, using variable costing. Play Zone Posting Income Statement October 2018 November 2018 Total Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Play Zone Variable Costing Income Statement October 2018 November 2018 Total 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 costing. The primary reason for this is that are distributed across the entire production of fixed manufacturing overhead costs are run as part of the unit cost. Under the absorption costing method, 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 This November's costs that absorption costing assigned to that inventory are expensed in absorption costing income. 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, 2018 November 30, 2018 Absorption Variable Variable Absorption costing costing costing costing Finished Goods Inventory The higher inventory balance under is representative of the Under absorption costing, the difference in the product cost per game is whereas under variable costing, the difference in the product cost per game is Data Table X October November Sales 1,300 units 3,000 units 2,900 units Production 2,900 units $ 18 $ 18 6 6 Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs 11,600 11,600 8,500 8,500 Print Done