Hazelnut Corporation manufactures lawn ornaments. It currently has two product lines, the basic and the...
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Accounting
Hazelnut Corporation manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $151,544 in overhead.
The company has identified the following information about its overhead activity pools and the two product lines:
Activity Pools
Cost Driver
Cost Assigned to Pool
Quantity or Amount Consumed by Basic
Quantity or Amount Consumed by Luxury
Materials handling
Number of moves
$ 4,189
29
moves
42
moves
Quality control
Number of inspections
$ 35,155
220
inspections
110
inspections
Machine maintenance
Number of machine hours
$ 112,200
6,000
machine hours
4,200
machine hours
Required:
Suppose Hazelnut used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
Calculate the activity rates for each activity pool in Hazelnuts ABC system.
Calculate the amount of overhead that Hazelnut will assign to the basic line if it uses an ABC system.
Determine the amount of overhead Hazelnut will assign to the luxury line if it uses an ABC system.
Compare the results for a traditional system with that of an ABC system. Which do you think is more accurate?
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