Hazelnut Corp. manufactures lawn ornaments. It currently has twoproduct lines, the basic and the luxury. Hazelnut has a total of$169,007 in overhead.
The company has identified the following information about itsoverhead 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 | | $ | 4,032 | | 25 moves | 47 moves |
| Quality control | Number of inspections | | $ | 33,375 | | 200 inspections | 175 inspections |
| Machine maintenance | Number of machine hours | | $ | 131,600 | | 5,700 machine hours | 3,700 machine hours |
|
Required:
1. Suppose Hazelnut used a traditional costing system withmachine hours as the cost driver. Determine the amount of overheadassigned to each product line. (Do not round intermediatecalculations and round your final answers to the nearest wholedollar amount.)
2. Calculate the activity rates for each cost poolin Hazelnut’s ABC system.
3. Calculate the amount of overhead that Hazelnutwill assign to the basic line if it uses an ABC system.
4. Determine the amount of overhead Hazelnut willassign to the luxury line if it uses an ABC system.
5. Compare the results for a traditional systemwith that of an ABC system. Which do you think is moreaccurate?
| Traditional System |
| ABC System |
