Question

PA4-1 Assigning Costs Using Traditional System, ABC System [LO 4-1, 4-3, 4-4, 4-6] Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $175.910 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Cost Quantity/Amount ConsumedQuantity/Amount Consumed / Assigned by by Activity Cost Pools Cost Driver to Pool Basic Luxury Materials handling Number of moves $ 4,050 28 moves 47 moves Quality control Number of inspections $ 36,660 250 inspections 140 inspections Machine maintenance Nurnber of machine hours $ 135,200 5,100 machine heurs 5,300 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 Overhead Assigned Overhead Assigned Luxury Model 2. Calculate the activity rates for each cost pool in Hazelnut's ABC system. Materials Handling Quality Control Activity Rates per Move per Inspection per Machine Hour Machine Maintenance

Answer 1

1) Overhead assigned

Basic Model = 175910/10400*5300 = 89646

Luxury Model = 86264

2) Activity rate

	Activity rate
Material handling	4050/75 = 54 per move
Quality control	36660/390 = 94 per inspection
Machine maintenance	135200/10400 = 13 per MH

3) Basic Model

	Overhead assigned
Material handling	28*54 = 1512
Quality Control	94*250 = 23500
Machine maintenance	66300
Total	91312

4) Luxury Model

	Overhead assigned
Material handling	47*54 = 2538
Quality Control	94*250 = 13160
Machine maintenance	68900
Total	84598

5) ABC System