Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $139,714 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Activity Cost Pools Cost Driver Materials handling Number of moves Quality control Number of inspections Number of machine Machine maintenance hours Cost Assigned to Pool $ 4,004 $ 30,710 Quantity/Amount Consumed by Basic 22 moves 220 inspections Quantity/Amount Consumed by Luxury 55 moves 110 inspections $ 105,000 5,300 machine hours 5,200 machine hours Required: 1. Suppose Hazelnut used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) Basic Model Luxury Model Overhead Assigned Overhead Assigned 2. Calculate the activity rates for each cost pool in Hazelnut's ABC system. (Round your answers to the nearest whole dollar.) Activity Rates Materials Handling Quality Control Machine Maintenance per Move per Inspection per Machine Hour

Answer 1

1
Basic model	70522	=139714/(5300+5200)*5300
Luxury model	69192	=139714/(5300+5200)*5200
2
	Activity rates
Materials handling	52	per Move	=4004/(22+55)
Quality Control	93	per Inspection	=30710/(220+110)
Machine Maintenance	10	per machine hour	=105000/(5300+5200)
3
Basic Model
Materials handling	1144	=22*52
Quality Control	20460	=220*93
Machine Maintenance	53000	=5300*10
Total overhead assigned	74604
4
Luxury Model
Materials handling	2860	=55*52
Quality Control	10230	=110*93
Machine Maintenance	52000	=5200*10
Total overhead assigned	65090
5
ABC system is more accurate, as it is based on activity usage by each product