Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $147,638 in overhead. The company has identified the following information about its overhead activity cost pools and the two product lines: 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 $ 2,838 $ 26,000 $118,800 Quantity/Amount Quantity/Amount Consumed by Consumed by Basic Luxury 12 moves 54 moves 200 inspections 100 inspections 5,200 machine hours 4,700 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

Answer 1

Plantwide rate per machine hour = Total Overheads/Total Machine hours
=147,638/9900
14.91292929	per machine hour
Assigned = Rate*Machine hours
Basic	77,547	Overhead Assigned
Luxury	70,091	Overhead Assigned
Activity Rate = Overheads/Total Driver
Material Handling	43	per move
QC	87	per inspection
Machine Maintenance	12	per machine hour
Basic
Material Handling 12*43	516
QC 200*87	17,400
Machine Maintenance 5200*12	62,400
Totak Overhead Assigned	80,316
Luxury
Material Handling 54*43	2,322
QC 100*87	8,700
Machine Maintenance 4700*12	56,400
Totak Overhead Assigned	67,422
ABC is more accurate as it uses different cost drivers