Hazcinut Corp manutactures lawn omamcnts It currently has tw

Hazcinut Corp. manutactures lawn omamcnts. It currently has two product linos, the basic and the luxury. Hazelnut has a total of 153,486 in overhcad. The company hes identified the following information about its overhead activity cost pools and the two product lines Assignod Activity Cost Pools Matenals handlung Quaity control Machine intenince by Basic 20 moves 150 inspertions by Luxury Cos Driver Number of moves to Pool S 3626 9D inscectians 4,900 chine hours S 3D 280 Nurrber of machine hours 119800 300 mahine hours Required: 1. Suppose Hazelnut used whole dollar amount.) radito al costing system with machine hours as th cost driver Determine he amount o overhead ass gned to each product line o no round intermediate ca culations and round your final answers o he nearest 2. Calculate the activity rates for each cost pool in Hazelnut\'s ABC system. 3. Calculate the amount of overhe d that Hazelnut will assign to the basic line if it uses n ABC system 4. Detemine the amount of overhead Hazelnut will assign to the luxury line it it uses an ABC system. 5. Congete lhe resulls for a lradilional system with lhal of an ABC system, which do you think is mo\' accura!s?

Solution

1) overhead rate = overhead/total machine hours 153,486/(4300+4900) 16.68326 overhead assigned Basic 16.68326 * 4300 = 71738 luxury 16.68326 * 4900 = 81748 total overhead 153486 2) Activity rates cost qty activity rate activity 3,626 74 49 per move materials handling 30,260 340 89 per inpection Quality control 119,600 9200 13 per machine hour Machine maintenance 3) Amount of overhead assigned to basic line Activity a b c=a*b activity rate overhead materials handling 49 20 980 Quality control 89 150 13350 Machine maintenance 13 4,300 55900 total 70230 4) overhead assinged to luxury Activity a b c=a*b activity rate overhead materials handling 49 54 2646 Quality control 89 190 16910 Machine maintenance 13 4,900 63700 total 83256 5) ABC is better as rates are based on actual activities thus assinged overhead is more accurate