Grande Enterprises manufactures speedboats and canoes. Information regarding its resources for the month of May follows:

Resources Resources Used Supplied Marketing $28,000 $30,000 Depreciation 24,000 40,000 Outside contracts 12,000 12,000 Materials 60,000 60,000 Setups 17,000 20,000 Energy 20,000 21,000 Parts management 15,000 16,000 Engineering changes 10,000 12,000 Short-term labor 7,000 7,000 Long-term labor 10,000 14,000 Administrative services 20,000 30,000 In addition, Grande spent $15,000 on 600 quality inspections with a cost-driver rate of $25 per inspection, and it spent $8,000 on 200 customer service calls with a cost-driver rate of $30 per service call.

Sales for August were $350,000.

Required

a. Prepare an activity-based income statement (similar to Exhibit 5-6).

b. Write a short report explaining why the ABM income statement provides better information to managers than a traditional income statement. Use information for Grande in your discussion.