ACC 561 new Week 4 WileyPLUS Assignment Paper Exercise 17 2

659 Words Sep 17th, 2015 3 Pages
Managerial Analysis-Exercise 17.2
Accounting: ACC/561

Managerial Analysis-Exercise 17.2
As part of the managerial analysis exercise 17.2 the Ideal Manufacturing Company is reviewed. The company uses an R & D department to help innovate different machinery products that the business produce. However recently the R & D department is spirally uncontrollably with cost, the business has to configure whether to find a different approach or not (John Wiley & Sons, Inc. 2011). Thus the following exercises are completed to understand how to determine what pricing decisions to make.
Exercise 17.2- A
In this part of the exercise the activity-based overhead is configured for every activity cost item. There are four activities which are
…show more content…
Thus market design would be 126,000, product design is 263,200, product development is 400,000 and prototype testing is 257,600. Then all cost are added together to gain the charge for the in-housing manufacturing department for a total of $1,046,800.
Exercise 17.2- C
In the next part of the exercise the following question is asked, How much cost would serve as the basis 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 (John Wiley & Sons, Inc. 2011)? The amount that is charged to an outside manufacturing department would be calculated by multiply the overhead rate to each activity that is conducted. Thus market design would be 56,000, product design is 167,320, product development is 120,000 and prototype testing is 196,000. Then all cost are added together to gain the charge for the outside manufacturing department for a total of $539,320.
Exercise 17.2- D
The last part of the exercised ask, “What is beneficial to Ideal Manufacturing of applying activity-based costing to its R & D activity for both in-house and outside charging purposes?” (John Wiley & Sons, Inc. 2011). The benefits of using activity-based costing allow the business to make decisions in regards to price of its farm machinery products. This creates an understanding

Related Documents