The TBB Game Company mainly manufactures and markets a single computer game software " Treatment Game ". The following is the relevant information about the Company in 2020 and 2021 :

Price per unit	2020 _ $60	2021 _ $70
Manufacturing cost per unit:
direct material	$12	$12
Direct labor	$5	$5
variable manufacturing overhead	$3	$3
Fixed manufacturing cost per year	$60,000	$60,000
Selling and Administrative Expenses:
Variable selling and administrative expenses per unit	$4	$4
Annual fixed selling and administrative expenses	$20,000	$20,000
Budget production	5,000	5,000
Beginning Inventory	0	1,000
production quantity	5,000	3,000
Sales volume	4,000	3,500
Closing inventory	1,000	500
Require:

1. Assuming the company uses variable costing, it calculates manufacturing costs per budgeted unit and prepares income statements for 2020 and 2021. ( 9 points)

2. Suppose the company uses absorption costing, calculates the manufacturing cost per budgeted unit, and prepares the income statement for 2020 and 2021. ( 10 points)

3. The general manager of the company does not understand why the operating income calculated by the two methods is different. Try to explain the difference between the two methods to the general manager, and explain the reasons for the difference in earnings in 2020 and 2021. ( 6 points)
4. Thanks so much

Answer rating: 100% (QA)

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