Hazelnut Corp, manufactures lawn omaments it currently has two product lns, the

Question

Hazelnut Corp, manufactures lawn omaments it currently has two product lns, the basic and the luxury Hazeinut has a total of $149,690in overhead The company has identified the following information about its overhead activity cost pools and the two product lines: Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Cost Assigned to Pool S 3,290 26,800 Quantity/Amount Consumed by Basic 12 moves 220 inspections Consumed by Luxury 58 moves 119,600 5,400 machine hours 3,B00 machine hours Required 1. Suppose Hazelnut used a tradtional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round ntermediate 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 Handing Quality Control Machine Maintenance per Move per Inspection per Machine Hour

Explanation / Answer

HAZELNUT Corpn. Basic Luxury Total Machine Hours Machine Hours $                                                                     5,400.00 $                      3,800.00 $                      9,200.00 Estimated Overhead Cost $                                                               1,49,690.00 Overhad Rate using the traditional (Plant wide) approach Formula= Estimated Overhead Cost/Total Machine Hours ($149690/9200)= $                            16.27 Overhead Assigned Machine Hours Cost per Machine Hours Overhead Assigned Basic Model 5400 $                            16.27                        87,861.52 Luxury Model 3800 $                            16.27                        61,828.48 Total                    1,49,690.00 Overhead Rates using activity based costing approach Activity based overhead rate Material Handling Cost assigned to Pool/Total Moves ($3290/(12+58) $                            47.00 Per moves Quality control Cost assigned to Pool/Total Inspections Activity based overhead rate ($26800/(220+115) $                            80.00 Per Inspection Machine Maintenance Cost assigned to Pool/Total Machine Hours ($119600/(5400+3800) $                            13.00 Per Machine Hours 3) Basic Model Material Handling 12*$47 $                          564.00 Quality Control 220*$80 $                    17,600.00 Machine Maintenance 5400*$13 $                    70,200.00 Total Overhead Assigned $                    88,364.00 4) Luxury Model Material Handling 58*$47 $                      2,726.00 Quality Control 115*$80 $                      9,200.00 Machine Maintenance 3800*$13 $                    49,400.00 Total Overhead Assigned $                    61,326.00 5) ABC system is more accurate Activity based costing is more accurate because its consider all imprtant factors into account before assigning cost to a product.

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