Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $164,775 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Cost Assigned Activity Cost Pools Cost Driver to Pool Materials handling Number of moves $ 2,940 Quality control Number of inspections $ 34,435 Machine maintenance Number of machine hours $127,400 Quantity/Amount Quantity/Amount Consumed by Consumed by Basic Luxury 29 moves 31 moves 240 inspections 120 inspections 5,000 machine hours 4,100 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

Cost Pool	Overheads	Basic	Luxury
Material Handling	2940	29	31
QC	34435	240	120
Machine Maintenance	127400	5000	4100
Total	164775
1.Cost assigned = Total overheads*Machine hours used/Total machine hours
Basic	90,536
Luxury	74,239
Activity rate = Overheads/Total activity
Cost Pool	Overheads	Basic	Luxury	Rate
Material Handling	2940	29	31	49	per move
QC	34435	240	120	96	per inspection
Machine Maintenance	127400	5000	4100	14	per MH
Assigned = Activity used*Rate
	Basic	Luxury
Material Handling	1,421	1,519
QC	23,040	11,520
Machine Maintenance	70,000	57,400
Total	94,461	70,439
ABC is more accurate

E F 1 Cost Pool 2 Material Handling 3 QC 4 Machine Maintenance 5 Total Overheads 2940 34435 127400 =SUM(B2:B4) co Basic Luxury 29 31 240 120 5000 4100 =B5*C4/SUM(C4:04) =B5*D4/SUM(C4:04) 31 7 1. Cost assigned = Total overheads* Machine hours used/Total machine hours 8 Basic 9 Luxury 10 11 Activity rate = Overheads/Total activity 12 Cost Pool 13 Material Handling 14 QC 15 Machine Maintenance 16 17 Assigned = Activity used* Rate 18 19 Material Handling 20 QC 21 Machine Maintenance 22 Total Overheads 2940 34435 127400 Basic 29 240 5000 Luxury Rate =B13/SUM(C13:D13) per move 120 96 per inspection 4100 =B15/SUM(C15:D15) per MH Basic =E13*C13 =E14*C14 =E15*C15 =SUM(B19:B21) Luxury =E13*D13 =E14*D14 =E15*D15 =SUM(C19:C21) 23 24 ABC is more accurate