(2) Operating income if absorption costing (CGAA adapted) 5. Comparative Income statements-absorption costing vs direct costing. On January 2, the Alabama Pulley Company began production of a new model. First quarter sales were 20,000 units and second quarter sales were 26,000 units at $10 each. Unit product costs each quarter were: direct materials. $1; direct labor, $2; and variable fac- tory overhead, $1.50. Fixed factory overhead was $62,440 each quarter and under absorption cost- ing was applied using an actual overhead rate. During the first quarter, 28.000 units were produced and during the second quarter, 22,000 units were produced. Marketing and administrative expenses consisted of $15,000 fixed each quarter, and the vari able portion was 5% of sales. The fifo Inventory method is used and inventory unit costs are rounded to the nearest cent. Required: (1) Comparative income statements for each quarter using (a) the absorption costing method and (b) the direct costing method. (2) Computations explaining the differences in operating income for each quarter. the