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 $135,230 in overhead.

The company has identified the following information about its overhead activity cost pools and the two product lines:

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.)

2. Calculate the activity rates for each cost pool in Hazelnut’s ABC system.

3. Calculate the amount of overhead that Hazelnut will assign to the basic line if it uses an ABC system.

4. Determine the amount of overhead Hazelnut will assign to the luxury line if it uses an ABC system.

Activity Cost Pools Cost Driver Cost Assigned
to Pool Quantity/Amount Consumed by
Basic Quantity/Amount Consumed by
Luxury Materials handling Number of moves $ 3,520 25 moves 39 moves Quality control Number of inspections $ 38,710 220 inspections 175 inspections Machine maintenance Number of machine hours $ 93,000 5,500 machine hours 3,800 machine hours

Explanation / Answer

1)Overhead rate=Total over head/Total machine hours
=135230/(5500+3800)=14.54
Basic model overhead=overhead rate*Total machine hrs
=14.54*5500=79975
Luxury model overhead=overhead rate*Total machine hrs
=14.54*3800=55255

2)Activity rate for materials handling=Total cost/no of moves
=3520/(25+39)=55
Quality control=Total cost.no of inspections
=38710/(220+175)=98
Machine maintenenace=Total cost/no of machine hrs
=93000/(5500+3800)=10

3)Basic model overhead:
Materials handling=55*25=1375
Quality control=98*220=21560
Machine maintenenace=10*5500=55000
Total overhead=77935

4)Luxury model:
Materials handling=55*239=2145
Quality control=98*175=17510
Machine maintenenace=10*3800=38000
Total overhead=57295

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.