Question:
Acme Manufacturing Company of Portland, Oregon has a Research & Development department that currently provides services to in-house manufacturing departments. Other manufacuturers have expressed interested in using Acme's R&D department for special projects. Management has decided to conduct an activity-based costing system in order to determine charges for both outside and in-house users of the department's services.
|
R&D activities fall into four pools with the following annual costs:
|
|
|
|
|
|
|
|
Market Analysis
|
|
10,50,000
|
|
|
|
Product Design
|
|
23,50,000
|
|
|
|
Product Development
|
|
36,00,000
|
|
|
|
Prototype Testing
|
|
14,00,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity analysis determines that the appropriate cost drivers and their usage for the four activities are:
|
|
|
|
|
|
|
|
Activities
|
|
Cost Drivers
|
|
Total Estimated Drivers
|
|
|
|
|
|
|
|
Market Analysis
|
|
Hours of analysis
|
|
1500 hours
|
|
Product Design
|
|
Number of designs
|
|
2500 designs
|
|
Product Development
|
|
Number of products
|
|
90 products
|
|
Prototype Testing
|
|
Number of tests
|
|
500 tests
|