BYP17-2 Ideal Manufacturing Company of Sycamore, Illinois, has supported a research and development (R&D) department that has for many years been the sole contributor to the companyâs new farm machinery products. The R&D activity is an overhead cost center that provides services only to in-house manufacturing departments (four different product lines), all of which produce agricultural/farm/ranch related machinery products. The department has never sold its services outside, but because of its long history of success, larger manufacturers of agricultural products have approached Ideal to hire its R&D department for special projects. Because the costs of operating the R&D department have been spiraling uncontrollably, Idealâs management is considering entertaining these outside approaches to absorb the increasing costs. But, (1) management doesnât have any cost basis for charging R&D servicesto outsiders, and (2) it needs to gain control of its R&D costs. Get research paper samples and course-specific study resources under homework for you course hero writing service – Manage ment decides to implement an activity-based costing system in order to determine the charges for both outsiders and the in house users of the departmentâs services.R&D activities fall into four pools with the following annual costs.Market analysis $1,050,000Product design 2,350,000Product development 3,600,000Prototype testing 1,400,000Activity analysis determines that the appropriate cost drivers and their usage for the four activitiesActivities Cost Drivers Estimated DriversMarket analysis Hours of analysis 15,000 hoursProduct design Number of designs 2,500 designsProduct development Number of products 90 productsPrototype testing Number of tests 500 testsInstructions(a) Compute the activity-based overhead rate for each activity cost pool.(b) How much cost would be charged to an in-house manufacturing department that consumed1,800 hours of market analysis time, was provided 280 designs relating to 10 products, andrequested 92 engineering tests?(c) How much cost would serve as the basis for pricing an R&D bid with an outside companyon a contract that would consume 800 hours of analysis time, require 178 designs relating to3 products, and result in 70 engineering tests?(d) What is the benefit to Ideal Manufacturing of applying activity-based costing to its R&D activityfor both in-house and outside charging purposes?
Travelling Experience
Can you remember your best experince in another country? Last summer (in 2007), I traveled to the United States for working and spending some time with my friends. I stayed two months in that country. I decided to travel because I wanted to do something different. I was bored about all my daily activities, so […]
