After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's Center Point 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 111,000 units of the Sport model and 45,500 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 24 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Sport Pro Total Assembly building Assembling Machine-hours 7,100 31,100 38,200 Setting up machines Setup hours 51 510 561 Handling material Production runs 19 51 70 Packaging building Inspecting and packing Direct labor-hours 64,400 25,000 89,400 Shipping Number of shipments 111 222 333 Pro Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport Direct material $1,511,000 $ 2,422,000 Direct labor Assembly $ 761,000 $ 622,000 Packaging 1,001,000 382,000 Total direct labor $1,762,000 $1,004,000 Direct costs $3,273,000 $3,426,000 Overhead Assembly building Assembling (@ $30 per MH ) $ 213,000 $ 933,000 Setting up machine (@ $900 per setup hour) 45,900 459,000 Handling material (@ $3,000 per run) 57,000 153,000 Packaging building Inspecting and packing (& $5 per direct labor-hour) 322,000 125,000 Shipping (@ $1,320 per shipment) 146,520 293,040 Total ABC overhead $ 784,420 $1,963,040 Total ABC cost $4,057,420 $5,389,040 Number of units 111,000 45,500 Unit cost $ 36.55 $ 118.44 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. Model Total ABC Overhead Sport Pro