**Ayala Inc. Costing Analysis**Ayala Inc. has conducted an analysis of its product lines using both a traditional costing system (volume-based) and an activity-based costing (ABC) system. Both systems incorporate direct materials and direct labor costs.### Total Costs| Products | Sales Revenue | Traditional | ABC ||-------------|---------------|-------------|-------|| Product 540X| $208,000 | $54,000 | $49,000|| Product 137Y| $155,000 | $48,000 | $30,000|| Product 249S| $92,000 | $23,000 | $46,000|**Task (a):**For each product line, compute the operating income using the traditional costing system.- **Product 540X**: $ [Enter calculation result here]- **Product 137Y**: $ [Enter calculation result here]- **Product 249S**: $ [Enter calculation result here]

Answered: Ayala Inc. has conducted the following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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**Ayala Inc. Costing Analysis**

Ayala Inc. has conducted an analysis of its product lines using both a traditional costing system (volume-based) and an activity-based costing (ABC) system. Both systems incorporate direct materials and direct labor costs.

### Total Costs

| Products | Sales Revenue | Traditional | ABC |
|-------------|---------------|-------------|-------|
| Product 540X| $208,000 | $54,000 | $49,000|
| Product 137Y| $155,000 | $48,000 | $30,000|
| Product 249S| $92,000 | $23,000 | $46,000|

**Task (a):**

For each product line, compute the operating income using the traditional costing system.

- **Product 540X**: $ [Enter calculation result here]
- **Product 137Y**: $ [Enter calculation result here]
- **Product 249S**: $ [Enter calculation result here]

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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