What is the benefit to acme manufacturing

Assignment Help Cost Accounting

Reference no: EM13163329

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?

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?

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: EM13163329

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