Absorption and Variable Costing with Over- and Underapplied Overhead Haherty, 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 (4 lbs. $1.50) $6.00 Direct labor (0.5 hr. O $18) 9.00 Variable overhead (0.5 hr @ $6) 3.00 Fixed overhead (0.5 hr. $9) Total $22.50 Selling and administrative costs Variable 32 per unit Fixed $230,000 During the year, the company had the following activity Units produced 24,000 Units sold 21,300 Unit selling price $36 Direct labor hours worked 12,000 Actual foced overhead was $12,000 less than budgeted fixed overhead. Budgeted variable overhead was $5,000 less than the actual variable overhead. The company used an expected actual activity level of 12,000 direct labor hours to compute the predetermined overhead rates. Any overhead variances are dosed to Coot of Goods Sold Required: 1. Compute the unit cost using (a) absorption costing and (b) variable costing. Round your answers to the nearest cent. Unit Cost Absorption costing Variable costing 2. Prepare an absorption-costing income statement. Flaherty, Inc. Absorption-Costing Income Statement For the First Year of Operations Less: Gross profit Operating income 3. Prepare a variable-costing income statement. 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 $ than variable costing