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PA4-1 Assigning Costs Using Traditional System, ABC System [LO 4-1,4-3,4-4, 4-6] Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and
PA4-1 Assigning Costs Using Traditional System, ABC System [LO 4-1,4-3,4-4, 4-6] Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $183,099 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: Quantity/Amount Consumed by Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Cost Assigned to Pool $ 2,604 S 33,495 $ 147,000 Quantity/Amount Consumed by Basic 18 moves 240 inspections 5,900 machine hours Luxury 44 moves 145 inspections 3,900 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 Luxury Model Overhead Assigned Overhead Assigned 2. Calculate the activity rates for each cost pool in Hazelnut's ABC system. Activity Rates per Move Materials Handling Quality Control Machine Maintenance per Inspection 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 $ 0 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 $ 0 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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