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 117,000 units of the Sport model and 48,500 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 18 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Total Sport Pro Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Machine-hours 7,700 31,700 39,400 Setup hours Production runs 57 570 627 25 57 82 Direct labor-hours 66,800 26,200 93,000 Number of shipments 351 117 234 3 Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Volume Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Cost Driver Sport Pro Total 31,700 39,400 Machine-hours 7,700 Setup hours Production runs 627 57 570 1.42 82 25 57 points 93,000 Direct labor-hours 66,800 26,200 Skipped Number of shipments 117 234 351 eBook Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport Pro Print $1,517,000 $2,434,000 Direct material Direct labor References $ 767,000 Assembly Packaging 634,000 1,007,000 394,000 $1,774,000 $3,291,000 $1,028,000 Total direct labor $3,462,000 Direct costs Overhead Assembly building Assembling ( $30 per MH Setting up machine ( $900 per setup hour) Handling material ( $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) $ 231,000 951,000 513,000 171,000 51,300 75,000 131,000 308,880 334,000 Shipping ( $1,320 per shipment ) 154,440 $2,074,880 Total ABC overhead 845,740 $4,136,740 $5,536,880 Total ABC cost Number of units 48,500 $ 117,000 Unit cost 35.36 114.16 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. Total ABC Model Overhead Sport Pro