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 VolumesCenterPoint Manufacturing Facility

		Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	7,700	31,700	39,400
Setting up machines	Setup hours	57	570	627
Handling material	Production runs	25	57	82
Packaging building
Inspecting and packing	Direct labor-hours	66,800	26,200	93,000
Shipping	Number of shipments	117	234	351

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

	Sport				Pro
Direct material	$	1,517,000			$	2,434,000
Direct labor
Assembly	$	767,000			$	634,000
Packaging		1,007,000				394,000
Total direct labor	$	1,774,000			$	1,028,000
Direct costs	$	3,291,000			$	3,462,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$	231,000			$	951,000
Setting up machine (@ $900 per setup hour)		51,300				513,000
Handling material (@ $3,000 per run)		75,000				171,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)		334,000				131,000
Shipping (@ $1,320 per shipment)		154,440				308,880
Total ABC overhead	$	845,740			$	2,074,880
Total ABC cost	$	4,136,740			$	5,536,880
Number of units		117,000				48,500
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.