Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $150,423 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 Machine maintenance Number of machine hours Cost Quantity/Amount Quantity/Amount Assigned consumed by Consumed by to Pool Basic Luxury $ 4,503 25 moves 54 moves $ 33,120 220 inspections 110 inspections $112,800 5,100 machine hours 4,300 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

Answers

• [1]

Basic Model	$81,612	Overgead assined	[$150423 x 5100 MHs / 9400 MHs]
Luxury Model	$68,811	Overgead assined	[$150423 x 4300 MHs / 9400 MHs]

• [2]

	Overhead cost	Total actvity	Activity rates
Material Handling	$4,503	79	$57	per Move
Quality Control	$33,120	330	$100	per Inspection
Machine maintenance	$112,800	9,400	$12	per MHs

• [3]

Basic
Material Handling	$1,425	25 moves x $ 57per Move
Quality Control	$22,000	220 inspections x $ 100 per Inspection
Machine maintenance	$61,200	5100 machine hours x $ 12per MHs
Total Overhead assigned	$84,625

• [4]

Luxury
Material Handling	$3,078	54 moves x $ 57per Move
Quality Control	$11,000	110 inspections x $ 100. per Inspection
Machine maintenance	$51,600	4300 machine hours x $ 12per MHs
Total Overhead assigned	$65,678

* [5] ABC is more accurate.