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 23 percent. Cost Drivers and Cost Driver Volumes--CenterPoint Manufacturing Facility Cost Driver Volume Cost Driver 7,260 31,200 38.400 Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Machine-hours Setup hours Production runs 64,880 25.200 90,000 Direct labor-hours Number of shipments 336 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport n Pro Direct material $1,512.000 $2,424,000 Direct labor Assembly $ 762,000 $ 624,000 Packaging 1.002,000 380,000 Total direct labor $1,764,000 $1,008,000 Direct costs 133,276,000 $3,432,000 Overhead Assebly building Assembling (e530 per ) 16.000 $936.000 Setting up machine ( 5900 per setup hour) 468,000 Handling material($3,000 per run) 0. 156,000 Packaging building Inspecting and packing ( 55 per direct labor.hu 126,000 Shipping (e $1,320 per shipment) 295.680