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. Products Product 540X Product 137Y Product 2495 Sales Revenue $197,000 170,000 81,000 Total Costs Traditional ABC $59,000 $46,100 54,000 25,000 11,000 52,900 For each product line, compute operating income using the traditional costing system. Product 540X $ $ Product 137Y $ Product 2495 $

Answer 1

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Ayala Inc.
Answer 1
Traditional method	Product 540X	Product 137Y	Product 249S
Sales Revenue	197,000.00	170,000.00	81,000.00
Total costs	59,000.00	54,000.00	11,000.00
Operating Income	138,000.00	116,000.00	70,000.00
Answer 2		E
ABC Method	Product 540X	Product 137Y	Product 249S
Sales Revenue	197,000.00	170,000.00	81,000.00
Total costs	46,100.00	25,000.00	52,900.00
Operating Income	150,900.00	145,000.00	28,100.00
Answer 3	Product 540X	Product 137Y	Product 249S
Operating Income- ABC	150,900.00	145,000.00	28,100.00
Operating Income- Traditional method	138,000.00	116,000.00	70,000.00
Amount difference	12,900.00	29,000.00	(41,900.00)
Percentage difference	9.35%	25.00%	-59.86%