Question

Exercise 17-02 a-c (Part Level Submission) Concord 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 $202,000 $59,000 $45,900 Product 137Y 172,000 52,000 41,000 Product 249S 84,000 17,000 41,100 Collapse question part (a) For each product line, compute operating income using the traditional costing system.

Answer 1

Answer:

(a) We have:

Product 540X operating income = $143,000

Product 137Y operating income = $120,000

Product 249S operating income = $67,000

(b) We have:

Product 540X operating income = $156,000

Product 137Y operating income = $131,000

Product 249S operating income = $42,900

Explanation:

Note: This question is not complete as there are two requirements. The two requirements are therefore provided before answering the question as follows:

Collapse question part (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.

The explanation of the answers is now given as follows:

(a) For each product line, compute operating income using the traditional costing system

Operating income = Sales revenue - Traditional …………………. (1)

Using equation (1), we have:

Product 540X operating income = $202,000 - $59,000 = $143,000

Product 137Y operating income = $172,000 - $52,000 = $120,000

Product 249S operating income = $84,000 - $17,000 = $67,000

(b) For each product line, compute operating income using the activity-based costing system.

Operating income = Sales revenue - ABC …………………. (2)

Using equation (3), we have:

Product 540X operating income = $202,000 - $45,900 = $156,000

Product 137Y operating income = $172,000 - $41,000 = $131,000

Product 249S operating income = $84,000 - $41,100 = $42,900