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iger Inc. has conducted the fol osting system (volume-based) nd the activity-based costing s Products Sales Product 440X Product 137Y $3 et 240s

iger Inc. has conducted the fol osting system (volume-based) nd the activity-based costing s Products Sales Product 440X Product 137Y $3 et 240s

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tiger Inc. has conducted the following analysis related to its product lines, using a tradi- tional costing system (volume-based) and an activity-based costing system. Both the tradi- tional and the activity-based costing systems include direct materials and direct labor costs. Total Costs АВС Products Sales Revenue Traditional Product 440X $300,000 180,000 $70,000 80,000 $50,000 55,000 Product 137Y Product 249S 100,000 30,000 55,000 Instructions (a) For each product line, compute operating income using the traditional costing system. (b) For each product line, compute operating income using the activity-based costing system. (c) Using the following formula, compute the percentage difference in operating income for each of the product lines of Tiger: Operating Income (ABC) – Operating Income (traditional cost) + Operating Income (traditional cost). (Round the percentage to two decimals.) (d) Provide a rationale as to why the costs for Product 440X are approximately the same using either the traditional or activity-based costing system.
Transcribed Image Text:Tiger Inc. has conducted the following analysis related to its product lines, using a tradi- tional costing system (volume-based) and an activity-based costing system. Both the tradi- tional and the activity-based costing systems include direct materials and direct labor costs. Total Costs АВС Products Sales Revenue Traditional Product 440X $300,000 180,000 $70,000 80,000 $50,000 55,000 Product 137Y Product 249S 100,000 30,000 55,000 Instructions (a) For each product line, compute operating income using the traditional costing system. (b) For each product line, compute operating income using the activity-based costing system. (c) Using the following formula, compute the percentage difference in operating income for each of the product lines of Tiger: Operating Income (ABC) – Operating Income (traditional cost) + Operating Income (traditional cost). (Round the percentage to two decimals.) (d) Provide a rationale as to why the costs for Product 440X are approximately the same using either the traditional or activity-based costing system.
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