Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $159,208 in overhead.

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $159,208 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Cost Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Assigned to Pool $ 3,108 $ 26,100 $130,000 Quantity/Amount Consumed by Basic 11 moves 200 inspections 5,200 machine hours Quantity/Amount Consumed by Luxury 63 moves 100 inspections 4,800 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 $ 82,788 Overhead Assigned 76,420: Overhead Assigned Luxury Model $ 2. Calculate the activity rates for each cost pool in Hazelnut's ABC system. (Round your answers to the nearest whole dollar.) Activity Rates per Move Materials Handling Quality Control Machine Maintenance per Inspection per Machine Hour

Answer 1

Working Notes: 1
	Calculation Of Predetermined Overhead rate on the basis of Machine Hours
	Predtermined Overhead =	Total Estiamted Manufacturing Overhead	"/" By	Total Estimated Hours (5200 +4800)
	Predtermined Overhead =	$                                   1,59,208	"/" By	10,000
	Predtermined Overhead =	$                                         15.92	Per Hours
Solution: 1
	Calculation of Overhead Assigned as per Traditional Costing Method
		Basic Model	Luxury Model
	Particulars	Amount in $	Amount in $
	Machine Hours Used	5,200	4,800
	Multiply By	"X' By	"X' By
	Predetermined Overhead Rate	$                                         15.92	$                           15.92
	Overhead Assigned =	$                                      82,788	$                         76,420
SOLUTION: 2
	Calculation of Activity Rate as per ABC
	Cost Driver Rate = Activity Cost / Cost Driver
	Activity	Cost Driver	Activity Cost	"/" By	Cost Driver	" = " To	Cost Driver Rate
	Material Handling	No. of Moves	$                           3,108	"/" By	74	" = " To	$                          42
	Quality Control	No. of Inspection	$                         26,100	"/" By	300	" = " To	$                          87
	Machine Maintenance	No. of Machine Hours	$                     1,30,000	"/" By	10,000	" = " To	$                          13
SOLUTION: 3
	Calculation of the Overhead allocation to the basic lines as per ABC
	Activity	Activity Used	"X " By	Cost Driver rate	Cost
	Material Handling	11	"X " By	$                                42	$                         462
	Quality Control	200	"X " By	$                                87	$                   17,400
	Machine Maintenance	5,200	"X " By	$                                13	$                   67,600
	Total overhead Assigned				$                   85,462
SOLUTION: 4
	Calculation of the Overhead allocation to the Luxury lines as per ABC
	Activity	Activity Used	"X " By	Cost Driver rate	Cost
	Material Handling	63	"X " By	$                                42	$                     2,646
	Quality Control	100	"X " By	$                                87	$                     8,700
	Machine Maintenance	4,800	"X " By	$                                13	$                   62,400
	Total overhead Assigned				$                   73,746