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 106,000 units of the Sport model and 43,000 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 31 percent.

Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility

		Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	6,600	30,600	37,200
Setting up machines	Setup hours	46	460	506
Handling material	Production runs	14	46	60
Packaging building
Inspecting and packing	Direct labor-hours	62,400	24,000	86,400
Shipping	Number of shipments	106	212	318

Third Quarter Unit Cost Report, Activity-Based CostingCenterPoint Manufacturing Facility

	Sport				Pro
Direct material	$	1,506,000			$	2,412,000
Direct labor
Assembly	$	756,000			$	612,000
Packaging		996,000				372,000
Total direct labor	$	1,752,000			$	984,000
Direct costs	$	3,258,000			$	3,396,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$	198,000			$	918,000
Setting up machine (@ $900 per setup hour)		41,400				414,000
Handling material (@ $3,000 per run)		42,000				138,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)		312,000				120,000
Shipping (@ $1,320 per shipment)		139,920				279,840
Total ABC overhead	$	733,320			$	1,869,840
Total ABC cost	$	3,991,320			$	5,265,840
Number of units		106,000				43,000
Unit cost	$	37.65			$	122.46

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.