Question
Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $141,142 in overhead. The
Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $141,142 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 | $ | 3,552 | 26 moves | 48 moves | ||
Quality control | Number of inspections | $ | 27,590 | 190 inspections | 120 inspections | ||
Machine maintenance | Number of machine hours | $ | 110,000 | 5,000 machine hours | 5,000 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.) 2. Calculate the activity rates for each cost pool in Hazelnuts 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. 5. Compare the results for a traditional system with that of an ABC system. Which do you think is more accurate?
Traditional System | |
ABC System |
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