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d. Hamilton Auto Repai are charged $45 per direct labor hour wo cost Hamilton $15 per hour. EX ca CTIVE 4 Exercise 18.15 Absorption and Variable Costing with Over- and Underapplied Overhead Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal basis are as follows: $6.00 9.00 3.00 4.50 $22.50 Manufacturing costs (per unit): Direct materials (4 lbs. @ $1.50) Direct labor (0.5 hr. @ $18) Variable overhead (0.5 hr. @ $6) Fixed overhead (0.5 hr. @ $9) Total Selling and administrative costs: Variable Fixed $2 per unit $238.000 During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 24,000 21,300 $36 12,000 overhead was $5,000 less than the actual variable overhead. The company used an expected Actual fixed overhead was $12,000 less than budgeted fixed overhead. Budgeted variable actual activity level of 12,000 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. 2. Prepare an absorption-costing income statement. 3. Prepare a variable-costing income statement. 4. Reconcile the difference between the two income statements