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 follows: Manufacturing costs (per unit): Direct materials (3 lbs. 1.25) $3.75 Direct labor (0.4 hr. 14.00) 5.60 Variable overhead (0.4 hr. 4.00) 1.60 Fixed overhead (0.4 hr. @7.00) 2.80 Total $13.75 Selling and administrative costs: Variable Fixed $1.70 per unit $218,000 During the year, the company had the following activity: Units produced Units sold Unit selling price Direct labor hours worked 26,000 23,400 $36 10,400 Actual fixed overhead was $11,800 less than budgeted fixed overhead. Budgeted variable overhead was $5,300 less than the actual variable overhead. The company used an expected actual activity level of 10,400 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