Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines,

Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $155,653 in overhead The company has identified the following information about its overhead activity cost pools and the two product lines Cost Quantity/Amount ntity/Amount Consumed Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Assigned to Pool $ 3,888 $ 29,565 $122,200 by Basic 26 moves 160 inspections 4,100 machine hours by Luxury 46 moves 205 inspections 5,300 machine hours Required: I. Suppose Hazelnut used a traditional costing system with machin? hours as the cost driver. Determine the amount of overhead assigned to each product line Overhead Assigned Overhead Assigned Basic Model Luxury Model 2. Calculate the activity rates for each cost pool in Hazelnut's ABC system. Activity Rates Materials Handling Quality Control Machine Maintenance per Move per Inspection per Machine Hour 3. Calculate the amount of overhead that Hazelnut will assign to the basic line if it uses an ABC system. Basic Model Materials Handling Quality Control Machine Maintenance Total Overhead Assigned $ 4. Determine the amount of overhead Hazelnut will assign to the luxury line if it uses an ABC system Luxury Model Materials Handling Quality Control Machine maintenance Total Overhead Assigned $

Explanation / Answer

1) Overhead assigned under traditional method :

2) Activity rate :

3) Overhead assinged basic model under ABC :

67664

Overhead assigned to luxury model under ABC :

Basic model (155653*4100/9400) 67891 Overhead assigned luxury model (155653*5300/9400) 87762 Overhead assigned

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