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 112,000 units of the Sport model and 46,000 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 VolumesCenterPoint Manufacturing Facility Activity Cost Driver Cost Driver Volume Sport Pro Total Assembly building Assembling Machine hours 7,200 31,200 38,400 Setting up machines Setup hours 52 520 572 Handling material Production runs 20 52 72 Packaging building Inspecting and packing Direct labor hours 64,800 25,200 90,000 Shipping Number of shipments 112 224 336 Third Quarter Unit Cost Report, Activity Based CostingCenterPoint Manufacturing Facility Sport Pro Direct material $ 1,512,000 $ 2,424,000 Direct labor Assembly $ 762,000 $ 624,000 Packaging 1,002,000 384,000 Total direct labor $ 1,764,000 $ 1,008,000 Direct costs $ 3,276,000 $ 3,432,000 Overhead Assembly building Assembling ( $30 per MH) $ 216,000 $ 936,000 Setting up machines ( $900 per setup hour) 46,800 468,000 Handling material ( $3,000 per run) 60,000 156,000 Packaging building Inspecting and packing ( $5 per direct labor hour) 324,000 126,000 Shipping ( $1,320 per shipment) 147,840 295,680 Total ABC overhead $ 794,640 $ 1,981,680 Total ABC cost $ 4,070,640 $ 5,413,680 Number of units 112,000 46,000 Unit cost $ 36 35 $ 117 69 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 112,000 units of the Sport model and 46,000 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 VolumesCenterPoint Manufacturing Facility

Activity	Cost Driver	Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	7,200	31,200	38,400
Setting up machines	Setup hours	52	520	572
Handling material	Production runs	20	52	72
Packaging building
Inspecting and packing	Direct labor-hours	64,800	25,200	90,000
Shipping	Number of shipments	112	224	336

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

	Sport	Pro
Direct material	$ 1,512,000	$ 2,424,000
Direct labor
Assembly	$ 762,000	$ 624,000
Packaging	1,002,000	384,000
Total direct labor	$ 1,764,000	$ 1,008,000
Direct costs	$ 3,276,000	$ 3,432,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$ 216,000	$ 936,000
Setting up machines (@ $900 per setup hour)	46,800	468,000
Handling material (@ $3,000 per run)	60,000	156,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)	324,000	126,000
Shipping (@ $1,320 per shipment)	147,840	295,680
Total ABC overhead	$ 794,640	$ 1,981,680
Total ABC cost	$ 4,070,640	$ 5,413,680
Number of units	112,000	46,000
Unit cost	$ 36.35	$ 117.69

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.