Ashley Company has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity based costing system. The traditional and the activity based costing systems assign the same amount of direct materials and direct labor costs.

Explain the difference between traditional and activity based costing.

		Total Costs	Total Costs
Product	Sales Revenue	Traditional	ABC
Product 540X	$180,000	$55,000	$50,000
Product 137Y	160,000	50,000	35,000
Product 249S	70,000	15,000	35,000

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 Ashley: [Operating Income (ABC) - Operating Income (traditional cost)] / Operating Income (traditional cost). (Round to two decimals).

d. Provide a rationale as to why the costs for Product 540X are approximately the same using either the traditional or activity based costing system.

Please clearly explain each step and how you got each number and please label everything.