How much cost would be charged to an in-house manufacturing

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Reference no: EM13341698

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
                          1,050,000
Product Design
                          2,350,000
Product Development
                          3,600,000
Prototype Testing
                          1,400,000

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

a) Compute the activity-based overhead rate for each pool. Use appropriate excel formulas to show your work

Market Analysis
Product Design
Product Development
Prototype Testing


b) How much cost would be charged to an in-house manufacturing department that consumed 1,800 hours of market analysis time, was provided 280 designs relating to 10 products and requested 92 engineering tests? Show your work.

Market Analysis
Product Design
Product Development
Prototype Testing
Total


c) How much cost would serve as the basis for for pricing an R&D bid with an outside company on a contract that would consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering tests? Show your work.

Market Analysis
Product Design
Product Development
Prototype Testing
Total


d) What is the benefit to Acme Manufacturing of applying activity-based costing to its R&D activity for both in-house and outside charging purposes?

 

 

Reference no: EM13341698

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