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 105,000 units of the Sport model and 42,500 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 30 percent Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Sport Pro Total Assembly building Assembling Machine-hours 6, See 30, 500 37, Setting up machines Setup hours Handling material Production runs 45 Packaging building Inspecting and packing Direct labor-hours 62, 23,800 85,800 Shipping Number of shipments 105 210 05 13 315 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,505.000 $2.410,000 $ 755,00 995.ge $1,750.ee $3.255 S610. 370, cee 980. Bee 53,390.00 Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling seper ) Setting up eachine (5900 per setup hour) Handling material ( 53,000 per run) Packaging building Inspecting and packing ( per direct labor-hour) Shipping ( 51,120 per shipment) Total A Coverhead Total AC cost $ $ 195,00 4. See 39. 915.00 495.000 135.0 310.ee 119. 2222 $1.551 55.2012 Unit cost Third Quarter Unit Cost Report, Activity Based Cosung-CenterPoint Manufacturing Facility Sport Direct material $1,5es, eae 52,418,eee Direct labor Assembly $ 755, eee $ 610.800 Packaging 995, eee 370.000 Total direct labor $1,750, eee $ 980,000 Direct costs $3,255, eee $3,390,000 Overhead Assembly building Assembling (@$30 per MH) $ 195, eee $ 915,000 Setting up machine (@ $900 per setup hour) 40, see 405,000 Handling material (@53,eee per run) 39,000 135,00 Packaging building Inspecting and packing ( $5 per direct labor-hour) 310,000 119, eee Shipping (@$1,320 per shipment) 138,600 277,200 Total ABC overhead 723.100 $1,851,200 Total ABC cost S.97.120 $5,241,200 Number of units 105, 42.5 Unit cost 17.89 123.32 Required: a. 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. Model Total ABC Overhead