Exercise 9-33 (Static) Activity-Based Costing (LO 9-4, 5) 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 100,000 units of the Sport model and 40,000 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 Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Cost Driver Machine-hours Setup hours Cost Driver Volume Sport Pro Total 6,000 30,000 36,000 40 400 440 Production runs 8 40 48 Direct labor-hours Number of shipments 60,000 22,800 82,800 100 200 300 Shipping Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling (@$30 per MH) Setting up machines (@$900 per setup hour) Handling material (@$3,000 per run) Packaging building Inspecting and packing (@$5 per direct labor-hour) Shipping (@$1,320 per shipment) Total ABC overhead. Total ABC cost Number of units Unit cost $1,500,000 $750,000 990,000 $1,740,000 $ 3,240,000 Pro $2,400,000 $ 600,000 360,000 $960,000 $3,360,000 $ 180,000 $900,000 36,000 360,000 24,000 120,000 300,000 114,000 132,000 264,000 $ 672,000 $ 3,912,000 100,000 $ 39.12 $ 1,758,000 $5,118,000 40,000 $127.95 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