Khan Inc. has conducted the following analysis related to its product lines using a traditional costing system

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Khan 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 labour costs.
Khan Inc. has conducted the following analysis related to its

Instructions
(a) For each product line, calculate operating income using the traditional costing system.
(b) For each product line, calculate operating income using the activity-based costing system.
(c) Using the following formula, calculate the percentage difference in operating income for each of Khan's product lines: [Operating Income (ABC) 2 Operating Income (traditional cost)] 4 Operating Income (traditional cost). (Round the percentage to two decimals.)
(d) Provide a rationale for why the costs for Product 440X are approximately the same using either the traditional or activity-based costing system.

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Managerial Accounting Tools for Business Decision Making

ISBN: 978-1118856994

4th Canadian edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly

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