Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Game Spot Variable Costing Income Statement October 2018 November 2018 Total Net Sales Revenue 73,800 $ 114,800 $ 188,600 Variable Costs 45,000 70,000 115,000 Contribution Margin 28,800 44,800 73,600 Fixed Costs 24,000 24,000 48,000 Operating Income 4,800 $ 20,800 $ 25,600 Data Table October 1,800 units 2,700 units November 2,800 units 2,700 units Requirement 3. Is operating income higher under absorption costing or variable costing in October? In November? Explain the pattern of differences in operating incon $ 18 $ 18 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 4,500 of fixed manufacturing overhead costs are Sales Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs 7 13,500 13,500 10,500 10,500 In November, the operating income is higher under variable costing. The primary reason for this is because $ 500 of fixed manufacturing overhead that is contained in the units in ending inventory under absorption costing is not contained in the units of ending inventory under variable costing. As inventory declines, as was the case in November, October's fixed manufacturing overhead costs that absorption costing assigned to that inventory are expensed in November. This decreases November's absorption costing income. Print Done 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 Absorption Variable costing costing costing costing Finished Goods Inventory $ 20,700 $ 16,200 Puon