Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $175,565 in overhead.

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

Activity Cost Pools	Cost Driver	Cost Assigned to Pool	Quantity/Amount Consumed by Basic	Quantity/Amount Consumed by Luxury
Materials handling	Number of moves	$3,640	25 moves	40 moves
Quality control	Number of inspections	$37,525	220 inspections	175 inspections
Machine maintenance	Number of machine hours	$134,400	5,000 machine hours	4,600 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
Luxury Model	_____	Overhead Assigned

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

	Activity Rates
Material Handling		Per Move
Quality Control		Per Inspection
Machine Maintenance		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
Material 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
Material Handling
Quality Control
Machine Maintenance
Total Overhead Assigned	$_____

Answer 1

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.

Basic Model = 175565/9600*5000 = $91440

Luxury model = 175565/9600*4600 = $84125

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

	Activity rate
Material Handling (3640/65)	$56 per move
Quality Control (37525/395)	$95 per inspection
Machine Maintenance (134400/9600)	$14 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
Material Handling (56*25)	1400
Quality Control (95*220)	20900
Machine Maintenance (14*5000)	70000
Total Overhead Assigned	92300

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

Luxury Model
Material Handling (56*40)	2240
Quality Control (95*175)	16625
Machine Maintenance (14*4600)	64400
Total Overhead Assigned	83265