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Game Depot manufactures video games that it sells for $39 each. The company uses a fixed manufacturing overhead allocation rate of $4 per game. Assume all costs and production levels are exactly as planned. The following data are from Game Depot's first two months in business: (Click the icon to view the data.) Data table Sales Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs Print $ October 2,000 units 2,300 units 11 S 6 Done 9,200 9,000 November 2,500 units 2,300 units 11 6 9,200 9,000 Requirements 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: absorption costing. variable costing. a. b. 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. Print Done - X

Game Depot manufactures video games that it sells for $39 each. The company uses a fixed manufacturing overhead allocation rate of $4 per game. Assume all costs and production levels are exactly as planned. The following data are from Game Depot's first two months in business: (Click the icon to view the data.) Data table Sales Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs Print $ October 2,000 units 2,300 units 11 S 6 Done 9,200 9,000 November 2,500 units 2,300 units 11 6 9,200 9,000 Requirements 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: absorption costing. variable costing. a. b. 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. Print Done - X

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 3E: Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began...
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Game Depot manufactures video games that it sells for $39 each. The company uses a fixed manufacturing overhead allocation rate of $4 per game. Assume all costs and production levels are exactly as planned. The following data are from Game Depot's first two months in business: (Click the icon to view the data.) Data table Sales Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs Print $ October 2,000 units 2,300 units 11 $ 6 Done 9,200 9,000 November 2,500 units 2,300 units 11 6 9,200 9,000 Requirements ▷ 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: absorption costing. a. 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. Print Done
Transcribed Image Text:Game Depot manufactures video games that it sells for $39 each. The company uses a fixed manufacturing overhead allocation rate of $4 per game. Assume all costs and production levels are exactly as planned. The following data are from Game Depot's first two months in business: (Click the icon to view the data.) Data table Sales Production Variable manufacturing cost per game Sales commission cost per game Total fixed manufacturing overhead Total fixed selling and administrative costs Print $ October 2,000 units 2,300 units 11 $ 6 Done 9,200 9,000 November 2,500 units 2,300 units 11 6 9,200 9,000 Requirements ▷ 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: absorption costing. a. 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. Print Done
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