Comparing Traditional and ABC Systems
Landau Company is considering a switch from its traditional costing system to an activity based system. It has compiled the following information regarding its product lines.
| Traditional Costing | ABC |
Revenue | $325,000 | $325,000 |
Overhead |
|
|
Product X | 52,000 | 71,000 |
Product Y | 50,000 | 31,000 |
| $102,000 | $102,000 |
Explain why the overhead costs could be so different between the two costing systems.
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