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Absorption and variable Costing with Over- and Underapplied Overthead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows Manufacturing costs (per unit): Direct materials (3 Ibs. o 1.40) $4.20 Direct labor (0.4 hr. O 14.50) 5.80 Variable overhead (0.4 hr. 5.00) 2.00 Fixed overhead (0.4 hr. 8.00) 3.20 Total $15.20 Selling and administrative costs: Variable $1.50 per unit $220,000 Fixed During the year, the company had the following activity: 26,500 Units produced 23,850 Units sold $34 Unit selling price 10,600 Direct labor hours worked overhead, Budgeted variable overhead was $4,000 less than the actual variable overhead. The Actual fixed overhead was $12,600 less than budpeted fixed overhead. Budgeted variable overhead was s4 hours to compute the predetermined overhead rates. Any overhead variances are company used an expected actual activity level of 10,600 direct labor closed to Cost of Goods Sold. Required: company used an expected actual activity level of 10,600 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold. Required 1. Compute the unit cost using (a) absorption costing and (b) variable costing. Unit Cost Absorption costing 14.57 Variable costing 11.85 2. Prepare an absorption-costing income statement. Round your answers to the nearest cent. Flaherty, Inc Absorption-Costing Income Statement For the First Year of Operations 810,900 Sales 347542.20 Underapplied overhead Less: 463.357.80 Gross profit 220,000 207,582.80 Operating income Ne Underapplied overhead 347,542.20 Less: Gross profit 463,357.80 220,000 Operating income 207,582.80 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. Flaherty, Inc. Variable-Costing Income Statement For the First Year of Operations Sales 810,900 Add: Contribution margin Less: 200,350.20 Operating income Operating income 207,582.80 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. Flaherty, Inc. Variable-Costing Income Statement For the First Year of Operations Sales 810,900 Add: Contribution margin Less: 200,350.20 Operating income 4. Reconcile the difference between the two income statements. than variable costing. The absorption costing generates an income