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ACC 561?Managerial Perspective Analysis - Ideal Manufacturing Company

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ACC 561?Managerial Perspective Analysis - Ideal Manufacturing Company;Writea paper that is at least 750 words(papers less than 750 words, will receive a reduction in points) in which you respond to the Broadening Your Perspective 17-2 activity titled ?Managerial Perspective? in Ch. 17 ofAccounting.;MANAGERIAL ANALYSIS;BYP17-2Ideal Manufacturing Company of Sycamore, Illinois, has supported a research and development;(R&D) department that has for many years been the sole contributor to the company?s;new farm machinery products. The R&D activity is an overhead cost center that provides services;only to in-house manufacturing departments (four different product lines), all of which produce;agricultural/farm/ranch related machinery products.;The department has never sold its services outside, but because of its long history of success;larger manufacturers of agricultural products have approached Ideal to hire its R&D department;for special projects. Because the costs of operating the R&D department have been spiraling uncontrollably;Ideal?s management is considering entertaining these outside approaches to absorb;the increasing costs. But, (1) management doesn?t have any cost basis for charging R&D services;to outsiders, and (2) it needs to gain control of its R&D costs. Management decides to implement;an activity-based costing system in order to determine the charges for both outsiders and the inhouse;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;Total;Activities Cost Drivers Estimated Drivers;Market analysis Hours of analysis 15,000 hours;Product design Number of designs 2,500 designs;Product development Number of products 90 products;Prototype testing Number of tests 500 tests;Instructions;(a) Compute the activity-based overhead rate for each activity cost pool.;(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?;(c) 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?;(d) What is the benefit to Ideal Manufacturing of applying activity-based costing to its R&D activity;for both in-house and outside charging purposes?;broadening your perspective

 

Paper#16856 | Written in 18-Jul-2015

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