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 110,000 units of the Sport model and 45,000 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 35 percent.

Cost Drivers and Cost Driver VolumesCenterPoint Manufacturing Facility

		Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	7,000	31,000	38,000
Setting up machines	Setup hours	50	500	550
Handling material	Production runs	18	50	68
Packaging building
Inspecting and packing	Direct labor-hours	64,000	24,800	88,800
Shipping	Number of shipments	110	220	330

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

	Sport				Pro
Direct material	$	1,510,000			$	2,420,000
Direct labor
Assembly	$	760,000			$	620,000
Packaging		1,000,000				380,000
Total direct labor	$	1,760,000			$	1,000,000
Direct costs	$	3,270,000			$	3,420,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$	210,000			$	930,000
Setting up machine (@ $900 per setup hour)		45,000				450,000
Handling material (@ $3,000 per run)		54,000				150,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)		320,000				124,000
Shipping (@ $1,320 per shipment)		145,200				290,400
Total ABC overhead	$	774,200			$	1,944,400
Total ABC cost	$	4,044,200			$	5,364,400
Number of units		110,000				45,000
Unit cost	$	36.77			$	119.21

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.