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Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $177,338 in overhead. The

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $177,338 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 $ 2,788 12 moves 56 moves
Quality control Number of inspections $ 30,550 230 inspections 95 inspections
Machine maintenance Number of machine hours $ 144,000 4,300 machine hours 5,300 machine hours

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 Hazelnuts ABC system.

Activity Rates

Materials 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

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 _____________

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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