PA4-1 (Algo) Assigning Costs Using Traditional System, ABC System [LO 4-1, 4-3, 4-4, 4-6]
Hazelnut Corporation manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of
$165,720 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
Quantity or Amount
Quantity or Amount Consumed by Luxury
Consumed by Basic
to Pool
Materials handling
Number of moves
$ 2,400
27 moves
33 moves
Quality control
Number of inspections
$ 33,120
220 inspections
110 inspections
Machine maintenance
Number of machine hours
$ 130,200
5,400 machine hours
3,900 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.
2. Calculate the activity rates for each activity 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.
5. Compare the results for a traditional system with that of an ABC system. Which do you think is more accurate?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3 Required 4 Required 5
Suppose Hazelnut used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead
assigned to each product line.
Note: Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.
Basic Model
Luxury Model
Overhead Assigned
Overhead Assigned
< Required 1
Required 2 >
