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 Model Total ABC Overhead Sport Pro

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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 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.