Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $130,150 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 $ 3,200 23 moves 41 moves

Quality control Number of inspections $ 27,950 220 inspections 105 inspections

Machine maintenance Number of machine hours $ 99,000 4,600 machine hours 5,300 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?