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.
|
Product
|
Sales Revenue
|
Total Cost
|
|
Traditional
|
ABC
|
|
Product 540X
|
$212,000
|
$58,000
|
$45,900
|
|
Product 137Y
|
165,000
|
50,000
|
39,000
|
|
Product 249S
|
82,000
|
20,000
|
43,100
|
(a) For each product line, compute operating income using the activity-based costing system.
(b) Using the following formula, compute the percentage difference in operating income for each of the product lines of Ayala:{Operating Income (ABC)-Operating Income traditional cost)]divided operating Income (traditional cost)(round the percentage to two decimals).