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After reviewing the new activity - based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 108,000 units of the Sport model and 44,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third.
Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility
Activity Cost Driver Cost Driver Volume
Sport Pro Total
Assembly building
Assembling Machine-hours 6,80030,80037,600
Setting up machines Setup hours 48480528
Handling material Production runs 164864
Packaging building
Inspecting and packing Direct labor-hours 63,20024,40087,600
Shipping Number of shipments 108216324
Third Quarter Unit Cost Report, Activity-Based CostingCenterPoint Manufacturing Facility
Sport Pro
Direct material $ 1,508,000 $ 2,416,000
Direct labor
Assembly $ 758,000 $ 616,000
Packaging 998,000376,000
Total direct labor $ 1,756,000 $ 992,000
Direct costs $ 3,264,000 $ 3,408,000
Overhead
Assembly building
Assembling (@ $30 per MH) $ 204,000 $ 924,000
Setting up machines (@ $900 per setup hour)43,200432,000
Handling material (@ $3,000 per run)48,000144,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)316,000122,000
Shipping (@ $1,320 per shipment)142,560285,120
Total ABC overhead $ 753,760 $ 1,907,120
Total ABC cost $ 4,017,760 $ 5,315,120
Number of units 108,00044,000
Unit cost $ 37.20 $ 120.80
Required:
Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

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