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Game Play manufactures video games that it sells for $42 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume costs and production levels are exactly as planned. The following data are from Game Play's first two months in business during 2018: E (Click the icon to view the data.) i Data Table - X Read the requirements Octob Net Sales Revenue October November Cost of Goods Sold Sales 1,200 units 2,800 units Gross Profit Production 2,500 units 2,500 units Selling and Administrative Costs Variable manufacturing cost per game 15 $ 15 Operating Income $ Sales commission cost per game 3 3 Total fixed manufacturing overhead 12,500 12,500 Requirement 2b. Prepare monthly income s costing. variable Total fixed selling and administrative costs 9,000 9,000 Ga Variable Costin Print Done Octobl Net Sales Revenue 50,400 $ 117,600 $ 168,000 Variable Costs 21,600 50,400 72,000 Contribution Margin 28,800 67,200 96,000 Fixed Costs 21,500 21,500 43,000 7,300 $ 45,700 $ 53,000 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 absorption costing. The primary reason for this is that in absorption costing, the fixed manufacturing overhead costs are distributed across the entire production | of fixed manufacturing overhead costs are run as part of the unit cost. Under the absorption costing method, 5 not expensed and remain in Finished Goods Inventory.

Game Play manufactures video games that it sells for $42 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume costs and production levels are exactly as planned. The following data are from Game Play's first two months in business during 2018: E (Click the icon to view the data.) i Data Table - X Read the requirements Octob Net Sales Revenue October November Cost of Goods Sold Sales 1,200 units 2,800 units Gross Profit Production 2,500 units 2,500 units Selling and Administrative Costs Variable manufacturing cost per game 15 $ 15 Operating Income $ Sales commission cost per game 3 3 Total fixed manufacturing overhead 12,500 12,500 Requirement 2b. Prepare monthly income s costing. variable Total fixed selling and administrative costs 9,000 9,000 Ga Variable Costin Print Done Octobl Net Sales Revenue 50,400 $ 117,600 $ 168,000 Variable Costs 21,600 50,400 72,000 Contribution Margin 28,800 67,200 96,000 Fixed Costs 21,500 21,500 43,000 7,300 $ 45,700 $ 53,000 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 absorption costing. The primary reason for this is that in absorption costing, the fixed manufacturing overhead costs are distributed across the entire production | of fixed manufacturing overhead costs are run as part of the unit cost. Under the absorption costing method, 5 not expensed and remain in Finished Goods Inventory.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...
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How to get the answer to fixed manufacturing overhead costs in requirement 3?

Game Play manufactures video games that it sells for $42 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume al costs and production levels are exactly as planned. The following data are from Game Play's first two months in business during 2018: |(Click the icon to view the data.) Data Table Read the requirements. Octob Net Sales Revenue $ October November Cost of Goods Sold Sales 1,200 units 2,800 units Gross Profit Production 2,500 units 2,500 units Selling and Administrative Costs Variable manufacturing cost per game 15 $ 15 Operating Income $ Sales commission cost per game 3 3 Total fixed manufacturing overhead 12,500 12,500 Requirement 2b. Prepare monthly income s costing. variable Total fixed selling and administrative costs 9,000 9,000 Ga Variable Costin Print Done Octobe Net Sales Revenue $ 50,400 $ 117,600 $ 168,000 Variable Costs 21,600 50,400 72,000 Contribution Margin 28,800 67,200 96,000 Fixed Costs 21,500 21,500 43,000 7,300 $ 45,700 $ 53,000 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 Otober, the operating income is higher under absorption costing. The primary reason for this is that in absorption costing, the fixed manufacturing overhead costs are distributed across the entire production run as part of the unit cost. Under the absorption costing method, | of fixed manufacturing overhead costs are not expensed and remain in Finished Goods Inventory.
Transcribed Image Text:Game Play manufactures video games that it sells for $42 each. The company uses a fixed manufacturing overhead allocation rate of $5 per game. Assume al costs and production levels are exactly as planned. The following data are from Game Play's first two months in business during 2018: |(Click the icon to view the data.) Data Table Read the requirements. Octob Net Sales Revenue $ October November Cost of Goods Sold Sales 1,200 units 2,800 units Gross Profit Production 2,500 units 2,500 units Selling and Administrative Costs Variable manufacturing cost per game 15 $ 15 Operating Income $ Sales commission cost per game 3 3 Total fixed manufacturing overhead 12,500 12,500 Requirement 2b. Prepare monthly income s costing. variable Total fixed selling and administrative costs 9,000 9,000 Ga Variable Costin Print Done Octobe Net Sales Revenue $ 50,400 $ 117,600 $ 168,000 Variable Costs 21,600 50,400 72,000 Contribution Margin 28,800 67,200 96,000 Fixed Costs 21,500 21,500 43,000 7,300 $ 45,700 $ 53,000 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 Otober, the operating income is higher under absorption costing. The primary reason for this is that in absorption costing, the fixed manufacturing overhead costs are distributed across the entire production run as part of the unit cost. Under the absorption costing method, | of fixed manufacturing overhead costs are not expensed and remain in Finished Goods Inventory.
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