Ayala Inc. has conducted the following analysis related to its product lines, using a traditional co activity-based costing system. Both the traditional and the activity-based costing systems inclu costs. Products Product 540X Product 137Y Sales Revenue $208,000 155,000 Total Costs Traditional ABC $54,000 $49,000 48,000 30,000 00.000 46.000
Ayala Inc. has conducted the following analysis related to its product lines, using a traditional co activity-based costing system. Both the traditional and the activity-based costing systems inclu costs. Products Product 540X Product 137Y Sales Revenue $208,000 155,000 Total Costs Traditional ABC $54,000 $49,000 48,000 30,000 00.000 46.000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
(a)
Sales Revenue
Product 137Y
$208,000
Product 540X $
Product 2495
$
155,000
$
92,000
Total Costs
Traditional
$54,000
48,000
For each product line, compute operating income using the traditional costing system.
23,000
ABC
$49,000
30,000
46,000
F
Expert Solution
Step 1: Introduction
Traditional costing income is a standard technique for external financial reporting that is required by (GAAP) in some cases. It is used to evaluate the profitability of products or services by including all production-related charges, both variable and fixed, in the cost structure, which might result in different profit estimations than variable costing.
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