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:

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 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.
5. Compare the results for a traditional system with that of an ABC system. Which do you think is more accurate andwhy?

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Quantity/Amount Quantity/Amount Cost Assigned Consumed by Consumed by Luxury 50 moves Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver to Pool 14,000 37,500 $120,000 Basic 20 moves 250 inspections 5,000 machine Number of moveS Number of 125 inspections inspections Number of 5,000 machine hours machine hours hours