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): During the year, the company had the following activity: Actual fixed overhead was $11,200 less than budgeted fixed overhead. Budgeted variable overhead was $5,400 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. 1. Compute the unit cost using (a) absorption costing and (b) variable costing. Feedback Check My Work The unit cost under absorption costing includes one more cost than under variable costing. The unit cost under variable costing includes one less cost than under absorption costing. 2. Prepare an absorption-costing income statement. Round your answers to the nearest cent. 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. Flaherty, Inc. Variable-Costing Income Statement 3. Prepare a variable-costing income statement. Round your answers to the nearest cent. Feedback Check My Work Use a contribution margin format income statement that groups costs according to behavior (variable and fixed) 4. Reconcile the difference between the two income statements. The absorption costing generates an income $ than variable costing. Feedback Check My Work IAIV= Fixed overhead rate (Production - Sales ) Feedback Check My Work Partially correct