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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...

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 $160,188 in overhead.

The company has identified the following information about its overhead 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 $ 4,108 18 moves 61 moves
Quality control Number of inspections $ 31,280 240 inspections 100 inspections
Machine maintenance Number of machine hours $ 124,800 5,400 machine hours 4,200 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 Overhead Assigned
Luxury Model Overhead Assigned


2. Calculate the activity rates for each cost pool in Hazelnut’s ABC system.



3. Calculate the amount of overhead that Hazelnut will assign to the basic line if it uses an ABC system.



4. Determine the amount of overhead Hazelnut will assign to the luxury line if it uses an ABC system.

Business   Accounting   
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Homework Answers

Answer #1
Req 1.
Estimated overheads 160188
Divide: Total machine hours 9600
OH rate per MH 16.68625
OH assigned:
Basic (5400 MH @ 16.68625) 90105.75
Luxury (4200 Mh @ 16.68625) 70082.25
req 2:
STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL
Activity Total Expected Activity
ACTIVITY COST POOL Measures Overheads Activity Rate
Material Handling Moves 4,108 79 52.00
Quality Control Inspetions 31,280 340 92.00
Machine Maintenance MH 124,800 9,600 13.00
Req 3 and 4:
Activity Rate Basic Luxury
Activity Oh Activity Oh
Material Handling 52 18 936 61 3172
Quality Control 92 240 22080 100 9200
Machine Maintenance 13 5400 70200 4200 54600
Total OH 93216 66972
OH allocated to basic: $ 93216
Oh allocated to Luxury: $ 66972
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