Requirements Data Table October November Sales 2,000 units 3,000 units Production 2,700 units 2,700 units 1. Compute the product cost per game produced under absorption costing and under variable costing. 2. Prepare monthly income statements for October and November, 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 October? In November? Explain the pattern of differences in operating income based on absorption costing versus variable costing. 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. $ 14 $ 14 7 7 Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs 13,500 13,500 11,500 11,500 Print Done Print Done Video King manufactures video games that it sells for $36 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume all costs and production levels are exactly as planned. The following data are from Video King's first two months in business during 2018: (Click the icon 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 costing 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. Video King Absorption Costing Income Statement October 2018 November 2018 Total Video King manufactures video games that it sells for $36 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume all costs and production levels are exactly as planned. The following data are from Video King's first two months in business during 2018: (Click the icon to view the data.) Read the requirements. Requirement 2a. Prepare monthly income statements for October and November, including columns for each month and a total column, using absorption costing. Video King Absorption Costing Income Statement October 2018 November 2018 Total Operating Income Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Video King Video King manufactures video games that it sells for $36 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume all costs and production levels are exactly as planned. The following data are from Video King's first two months in business during 2018: (Click the icon to view the data.) Read the requirements. ..... Operating Income Requirement 2b. Prepare monthly income statements for October and November, including columns for each month and a total column, using variable costing. Video King 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. Video King manufactures video games that it sells for $36 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume all costs and production levels are exactly as planned. The following data are from Video King's first two months in business during 2018: B! (Click the icon to view the data.) Read the requirements. as was the case in November, October's costs that absorption costing assigned to that inventory are expensed in absorption costing income. This November's 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 Variable Absorption 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
