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 111,000 units of the Sport model and 45,500 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 one third Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility Activity Cost Driver Cost Driver Volume Sport Pro Total Assembly building Assembling Machine hours 7,100 31,100 38,200 Setting up machines Setup hours 51 510 561 Handling material Production runs 19 51 70 Packaging building Inspecting and packing Direct labor hours 64,400 25,000 89,400 Shipping Number of shipments 111 222 333 Third Quarter Unit Cost Report, Activity Based CostingCenterPoint Manufacturing Facility Sport Pro Direct material $ 1,511,000 $ 2,422,000 Direct labor Assembly $ 761,000 $ 622,000 Packaging 1,001,000 382,000 Total direct labor $ 1,762,000 $ 1,004,000 Direct costs $ 3,273,000 $ 3,426,000 Overhead Assembly building Assembling ( $30 per MH) $ 213,000 $ 933,000 Setting up machines ( $900 per setup hour) 45,900 459,000 Handling material ( $3,000 per run) 57,000 153,000 Packaging building Inspecting and packing ( $5 per direct labor hour) 322,000 125,000 Shipping ( $1,320 per shipment) 146,520 293,040 Total ABC overhead $ 784,420 $ 1,963,040 Total ABC cost $ 4,057,420 $ 5,389,040 Number of units 111,000 45,500 Unit cost $ 36 55 $ 118 44 Required 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

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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 111,000 units of the Sport model and 45,500 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 one-third.

Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility

Activity	Cost Driver	Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	7,100	31,100	38,200
Setting up machines	Setup hours	51	510	561
Handling material	Production runs	19	51	70
Packaging building
Inspecting and packing	Direct labor-hours	64,400	25,000	89,400
Shipping	Number of shipments	111	222	333

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

	Sport	Pro
Direct material	$ 1,511,000	$ 2,422,000
Direct labor
Assembly	$ 761,000	$ 622,000
Packaging	1,001,000	382,000
Total direct labor	$ 1,762,000	$ 1,004,000
Direct costs	$ 3,273,000	$ 3,426,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$ 213,000	$ 933,000
Setting up machines (@ $900 per setup hour)	45,900	459,000
Handling material (@ $3,000 per run)	57,000	153,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)	322,000	125,000
Shipping (@ $1,320 per shipment)	146,520	293,040
Total ABC overhead	$ 784,420	$ 1,963,040
Total ABC cost	$ 4,057,420	$ 5,389,040
Number of units	111,000	45,500
Unit cost	$ 36.55	$ 118.44

Required:

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.