Exercise 17-2 (Part Level Submission) Ayala Inc. has conducted the following ana

Question

Exercise 17-2 (Part Level Submission) 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 Products Product 540X Product 137Y Product 249S Traditional ABC $202,000 172,000 84,000 $59,000 $45,900 52,000 41,000 17,000 41,100 (c) 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)] ÷ Operating Income (traditional cost). (Round answers to 2 decimal places, e.g. 12.25. Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Product 540X Product 137Y Product 249S

Explanation / Answer

Calculate percentage difference in operating income :

Percentage difference on product 540X = (156100-143000)/143000 = 9.16%

Percentage difference on product 137Y = (131000-120000)/120000 = 9.17%

Percentage difference on product 249S = (42900-67000)/67000 = (35.97%)

Product 540X Traditional ABC Sales revenue 202000 202000 Less: Cost (59000) (45900) Operating income 143000 156100

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