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 costing basis are as fol Manufacturing costs (per unit): Direct materials (3 lbs. 1.40) Direct labor (0.4 hr. @ 16.50) Variable overhead (0.4 hr. @ 5.00) Fixed overhead (0.4 hr. @ 6.00) $4.20 6.60 2.00 2.40 $15.20 Total Selling and administrative costs: Variable $1.50 per unit $219,000 Fixed During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 26,500 23,850 $38 10,600 was $12,200 less than b Actual fixed o was $5,300 less than the actual variable 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 Required: the unit cost using (a) absorption costing and (b) variable costing Unit Cost Flaherty, Inc. Gross proft Operating income 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 Add: Contribution margin Less: Operating income 4. Reconcile the difference between the two income statements The absorption costing generates an income s than variable costing