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 101,000 units of the Sport model and 40,500 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 26 percent.

Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility

		Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	6,100	30,100	36,200
Setting up machines	Setup hours	41	410	451
Handling material	Production runs	9	41	50
Packaging building
Inspecting and packing	Direct labor-hours	60,400	23,000	83,400
Shipping	Number of shipments	101	202	303

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

	Sport				Pro
Direct material	$	1,501,000			$	2,402,000
Direct labor
Assembly	$	751,000			$	602,000
Packaging		991,000				362,000
Total direct labor	$	1,742,000			$	964,000
Direct costs	$	3,243,000			$	3,366,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$	183,000			$	903,000
Setting up machine (@ $900 per setup hour)		36,900				369,000
Handling material (@ $3,000 per run)		27,000				123,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)		302,000				115,000
Shipping (@ $1,320 per shipment)		133,320				266,640
Total ABC overhead	$	682,220			$	1,776,640
Total ABC cost	$	3,925,220			$	5,142,640
Number of units		101,000				40,500
Unit cost	$	38.86			$	126.98

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.

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 101,000 units of the Sport model and 40,500 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 26 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Third Quarter Unit Cost Report, Activity-Based Costinq-CenterPoint Manufacturinq Facility Requlred: o. 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