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 109,000 units of the Sport model and 44,500 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 34 percent Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Sport Pro Total Assembly building Assembling Machine hours 6,900 30,900 37,800 Setting up machines Setup hours 49 490 539 Handling material Production runs 17 49 66 Packaging building Inspecting and packing Direct labor hours 63,600 24,600 88,200 Shipping Number of shipments 109 218 327 Third Quarter Unit Cost Report, Activity Based CostingCenterPoint Manufacturing Facility Sport Pro Direct material $ 1,509,000 $ 2,418,000 Direct labor Assembly $ 759,000 $ 618,000 Packaging 999,000 378,000 Total direct labor $ 1,758,000 $ 996,000 Direct costs $ 3,267,000 $ 3,414,000 Overhead Assembly building Assembling ( $30 per MH) $ 207,000 $ 927,000 Setting up machine ( $900 per setup hour) 44,100 441,000 Handling material ( $3,000 per run) 51,000 147,000 Packaging building Inspecting and packing ( $5 per direct labor hour) 318,000 123,000 Shipping ( $1,320 per shipment) 143,880 287,760 Total ABC overhead $ 763,980 $ 1,925,760 Total ABC cost $ 4,030,980 $ 5,339,760 Number of units 109,000 44,500 Unit cost $ 36 98 $ 119 99 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 Sport Model Total ABC Overhead Pro Model Total ABC Overhead

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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 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, 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 109,000 units of the Sport model and 44,500 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 34 percent.

Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility

		Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	6,900	30,900	37,800
Setting up machines	Setup hours	49	490	539
Handling material	Production runs	17	49	66
Packaging building
Inspecting and packing	Direct labor-hours	63,600	24,600	88,200
Shipping	Number of shipments	109	218	327

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

	Sport		Pro
Direct material	$	1,509,000	$	2,418,000
Direct labor
Assembly	$	759,000	$	618,000
Packaging		999,000		378,000
Total direct labor	$	1,758,000	$	996,000
Direct costs	$	3,267,000	$	3,414,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$	207,000	$	927,000
Setting up machine (@ $900 per setup hour)		44,100		441,000
Handling material (@ $3,000 per run)		51,000		147,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)		318,000		123,000
Shipping (@ $1,320 per shipment)		143,880		287,760
Total ABC overhead	$	763,980	$	1,925,760
Total ABC cost	$	4,030,980	$	5,339,760
Number of units		109,000		44,500
Unit cost	$	36.98	$	119.99

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.

Sport Model: Total ABC Overhead?

Pro Model: Total ABC Overhead?