Absorption and Variable Costing with Over$-$ and Underapplied Overhead

Flaherty, inc., hes just completed its frst year of operations. The unit costs on a normal costing basis are as follows:

Manufacturng costs $($per unit$)$:

Direct materials $(2lbs$ @ $1\mathrm{.}20)$

$$2\mathrm{.}40$

Direct labor @ $14\mathrm{.}50)$

$5\mathrm{.}80$

Variable overhead $(0\mathrm{.}4hr.$ @$4\mathrm{.}00),1\mathrm{.}60$

Fixed overhcad $(0\mathrm{.}4$ tr$.($@ $0\mathrm{.}00)$

Total

$\frac{2\mathrm{.}40}{\text{\$}12\mathrm{.}20}$

Selling and administrative costs:

Varable

$$1\mathrm{.}50$ per unit

Fixed

$$220,000$

During the year, the company had the folowing activity:

Units produced

Uniks sold

$27,500$

Unit seling price

$24,750$

Direct labor haurs worked

$$39$

$11,000$

Actual fixed overtread was $$12,800$ less than bucgeted fixed over herad, Buareted variable overhead was $$4,000$ less than the actual variatle overhead. The company used an expcted actual actrity level of $11\mathrm{.}000$ rlirect labor hours to cumpute the predeter nined overhead rates. Any overhead variances are dosed to cost or Goods Sold.

Dennuirent.

Prepare a variable$-$costing income statement. Rourd your answers to the neares

Flaherty, Inc.

Variahle$-$Costing Income statement

For the First Tear of Operations

$2.$ Prepare an sbsorption$-$costing income statemen: Round your answers to the ne

Flaherty, Inc.

Abeorption Casting Incume statement For the First Year of Operations

Trmitura

TClickith win

Atsorption costing assigns all marufecturing ussts to each urit nrodiniot