Question

Hazelnut Corp. manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $171,500 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 Assignedto Pool Quantity/Amount Consumed byBasic Quantity/Amount Consumed byLuxury Materials handling Number ofmoves $ 14,000 20 moves 50 movesQuality control Number of inspections $ 37,500 250 inspections 125 inspectionsMachine maintenance Number ofmachine hours $ 120,000 5,000 machine hours 5,000 machine hoursRequired: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.)2. Calculate the activity rates for each cost pool in Hazelnut

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Estimated overhead= $171,500

Total estimated number of machine hours= (5,000 + 5,000)= 10,000

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 171,500 / 10,000

Predetermined manufacturing overhead rate= $17.15 per machine hour

Now, we can allocate overhead to each product:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Basic= 17.15*5,000= $85,750

Luxury= 17.15*5,000= $85,750

Finally, the activities rates:

Materials handling= 14,000 / (20 + 50)= $200 per move

Quality control= 37,500 / (250 + 125)= $100 per inspection

Machine maintenance= 120,000 / (5,000 + 5,000)= $12 per machine hour