Charles Jackson, the accounting manager at Big Als , has just returned from a conference on activity-based costing in Seattle and thinks big Als should consider implementing an ABC system at the beginning of Year 2. Charles has identified five primary activities taking place in the production facility at Big Als, has traced overhead costs to each activity, and has identified a cost driver for each activity as follows: Estimated Year 2 Overhead Costs Activity Monthly Overhead Cost Cost Driver Material delivery /handling $4,620 # of shipments Assembly of pizzas $5,670 Direct Labor hours Packaging $1,260 Number of pizzas Storage of materials $3,150 Refrigerator space Quality inspections $2,100 Number of inspections Big Als gets material for the veggie pizzas twice per week so the veggies can remain fresh and crisp until used in production. Veggie pizzas are also thicker, due to the height of the toppings, than a one topping meat pizza, so more refrigerator space is estimated to be needed. Big Als has also determined that meat pizzas need to be inspected more frequently for quality control due to the much higher volume of production. Charles has estimated the activity for each cost driver as follows: Meat Pizzas Veggie Pizzas Total Number of material shipments 52 108 160 Direct Labor Hours 87,500 7,000 94,500 Number of Pizzas 352,800 25,200 378,000 Refrigerator space (cubic feet) 2,500 500 3,000 Number of inspections 80,000 4,000 84,000 What areas have the greatest potential for cost reduction, and what are the potential impacts on the business from these cost reductions