Case situation:
Perdon 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
Products Sales Revenue Traditional ABC
Product 540X $200,000 $55,000 $50,000
Product 137Y 160,000 50,000 35,000
Product 249S 80,000 15,000 35,000
Instructions
(1) For each product line, compute operating income using the traditional costing system.
(2) For each product line, compute operating income using the activity-based costing system.