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 | |||
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