Ayala Inc. has conducted the following analysis related to its product lines, us
ID: 2516260 • Letter: A
Question
Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. Both the traditional and the activity-based costing systems include direct materials and direct labor costs. Total Costs Sales Revenue Traditional ABC Product 540X Product 137Y Product 249S $59,000 $47,600 49,000 29,000 17,000 48,400 $210,000 $ 166,000 94,000 For each product line, compute operating income using the traditional costing system Product 540X Product 137Y Product 2495 LINK TO TEXT For each product line, compute operating income using the activity-based costing system Product 540X Product 137Y $ Product 249SExplanation / Answer
Answer
Product
540X
137Y
249S
Sales revenue
$ 2,10,000.00
$ 1,66,000.00
$ 94,000.00
(-) Traditional Cost
$ 59,000.00
$ 49,000.00
$ 17,000.00
Operating Income under Traditional Costing
$ 1,51,000.00
$ 1,17,000.00
$ 77,000.00
Product
540X
137Y
249S
Sales revenue
$ 2,10,000.00
$ 1,66,000.00
$ 94,000.00
(-) ABC Cost
$ 47,600.00
$ 29,000.00
$ 48,400.00
Operating Income under ABC
$ 1,62,400.00
$ 1,37,000.00
$ 45,600.00
Product
Operating Income under ABC (A)
Operating Income under Traditional costing (B)
Difference (A – B)
Percentage difference
540X
$ 1,62,400.00
$ 1,51,000.00
$ 11,400.00
7.55%
137Y
$ 1,37,000.00
$ 1,17,000.00
$ 20,000.00
17.09%
249S
$ 45,600.00
$ 77,000.00
$ (31,400.00)
-40.78%
Product
540X
137Y
249S
Sales revenue
$ 2,10,000.00
$ 1,66,000.00
$ 94,000.00
(-) Traditional Cost
$ 59,000.00
$ 49,000.00
$ 17,000.00
Operating Income under Traditional Costing
$ 1,51,000.00
$ 1,17,000.00
$ 77,000.00
Product
540X
137Y
249S
Sales revenue
$ 2,10,000.00
$ 1,66,000.00
$ 94,000.00
(-) ABC Cost
$ 47,600.00
$ 29,000.00
$ 48,400.00
Operating Income under ABC
$ 1,62,400.00
$ 1,37,000.00
$ 45,600.00
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