Week4assignment-4_Acme Manufacturing_ABC Costing
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 | ||||||
| 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? |