Question

8 Hazelnut Corp, manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $157,066 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: 1.91 points Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Cost Quantity/Amount Quantity/Amount Assigned Consumed by Consumed by to Pool Basic Luxury $ 2,666 22 moves 40 moves $ 27,200 200 inspections 100 inspections $127, 2005,600 machine hours 5,000 machine hours eBook 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.) Print ol References 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 Material Handling Quality Control Machine Maintenance per Move per inspection per Machine Hour

Answer 1

Requirement 1:

Under traditional costing & Cost driver is machine hours

Basic Model [$157,066 x 5,600/10,600]	$82,978	Overhead assigned
Luxury Model [$157,066 x 5,000/10,600]	$74,088	Overhead assigned

Requirement 2:

	Allocation rates
Materials handling	$43	Per movie
Quality control	$91	per inspection
Machine maintenance	$12	per machine hour

Calculations:

	Overhead cost	/	Base		=	Allocation rate
Materials handling	$2,666	/	62	Moves	=	$43	Per movie
Quality control	$27,200	/	300	Inspections	=	$91	per inspection
Machine maintenance	$127,200	/	10,600	Machine hours	=	$12	per machine hour

Requirement 3:

Basic Model
Materials Handling	$946
Quality Control	$18,200
Machine Maintenance	$67,200
Total Overhead Assigned	$86,346

Calculations:

	Base		x	Allocation rate	=	Overhead assigned
Materials Handling	22	moves	x	$43	=	$946
Quality Control	200	inspections	x	$91	=	$18,200
Machine Maintenance	5600	machine hours	x	$12	=	$67,200

Requirement 4:

Luxery Model
Materials Handling	$1,720
Quality Control	$9,100
Machine Maintenance	$60,000
Total Overhead Assigned	$70,820

Calculations:

	Base		x	Allocation rate	=	Overhead assigned
Materials Handling	40	moves	x	$43	=	$1,720
Quality Control	100	inspections	x	$91	=	$9,100
Machine Maintenance	5000	machine hours	x	$12	=	$60,000

Requirement 5:

ABC System is more accurate