Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $136,172 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Cost Quantity/Amount Quantity/Amount Consumed Assigned Consumed by by Activity Cost Pools Cost Driver to Pool Basic Luxury Materials handling Number of moves $ 3,312 21 moves 48 moves Quality control Number of inspections $ 32,760 200 inspections 160 inspections Machine maintenance Number of machine hours $ 100, 100 4.200 machine hours 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 Overhead Assigned Overhead Assigned Luxury Model 2. Calculate the activity rates for each cost pool in Hazelnut's ABC system. Activity Rates Materials Handling per Move Quality Control per Inspection per Machine Hour Machine Maintenance

Answer 1

1) Overhead applied under traditional method

Basic Model = 136172/9100*4200 = 62849

Luxury Model = 136172/9100*4900 = 73323

2) Calculate activity rate

	Activity rate
Material handling (3312/69)	48 per move
Quality control (32760/360)	91 per inspection
Machine maintenance (100100/9100)	11 per MH

3) calculate Overhead assigned to Basic Model

	Basic Model
Material handling (21*48)	1008
Quality Control (200*91)	18200
Machine maintenance (4200*11)	46200
Total overhead assigned	65408

4) calculate Overhead assigned to Luxury Model

	Basic Model
Material handling (48*48)	2304
Quality Control (160*91)	14560
Machine maintenance (4900*11)	53900
Total overhead assigned	70764

5) ABC system is more accurate