Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $148 204 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Cost Assigned to Pool $ 2,624 $30.080 $115,500 Quantity/Amount consumed by Basic 21 moves 2 20 inspections 5,600 machine hours Quantity/Amount Consumed by Luxury 43 soves 110 Inspections 4,900 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 doller.) Activity Rates Material Handling Quality Control Machine Maintenance per Move per Inspection per Machine Hour

Answer 1

Answer with working note is given below

1 Overhead assigned as per traditional method Basic Model $79,042 Overhead assigned Luxury Model $69,162 Overhead assigned Working note Total Overheads Total Machine hours $148,204 10,500 $14.11 Overhead assigned Basic Model Luxury Model $79,042|(5,600 X $ 14.11) $69,162|(4,900 X $ 14.11) 2 Activity Rates Material Handling Quality Control Machine maintenance Activity Rate $41.00 per move $91.15 per inspection $11.00 per Machine hour Working note Cost Pool Activities $2,6241 $30,080 330 $115,500 10,500 $148,204 Activity rate is Cost Pool divided by Total Activities 21 3 Basic Model Material Handling Quality Control Machine maintenance Total Overhead assigned Total Overhead Activities Activity rate $861 $41.00 $20,053 220 $91.15 $61,600 5,600 $11.00 $82,514 Total Overhead assigned as per ABC is activities consumed X Activity rate 4 Luxury Model Material Handling Quality Control Machine maintenance Total Overhead assigned Total Overhead Activities Activity rate $1,763 $41.00 $10,027 110 $91.15 $53,900 4,900 $11.00 $65,690 Total Overhead assigned as per ABC is activities consumed X Activity rate 5 ABC System is more accurate