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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, belleves that he

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility. Tom Spencer, the production supervisor, belleves 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 one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Cost Driver Machine-hours Setup hours Production runs Direct labor-hours Number of shipments Sport Cost Driver Volume Pro Total 6,600 46 14. 30,600 460 46 37,200 506 60 62,400 24,000 106 212 86,400 318 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machines (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (e ss per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units unit cost Sport $ 1,506,000 $ 756,000 996,000 $ 1,752,000 $3,258,000 Pro $ 2,412,000 $ 612,000 372,000 $ 984,000 $3,396,000 $198,000 41,400 42,000 312,000 139,920 $ 733,320 $ 3,991,320 106,000 $.37.65 $ 918,000 414,000 138,000 120,000 279,840 $ 1,869,840 $ 5,265,840 43,000 $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. Model Total ABC Overhead Sport Pro

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