Exercise 17.2 Managerial Analysis

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 mentioned in the exercise; market analysis, product design, product development, and prototype testing. Each have an annual cost; market analysis-annual cost is $1,050,000, product design annual cost is-$2,350,000, product development annual cost is $3,600,000, and prototype testing annual cost is $1,400,000 (John Wiley & Sons, Inc. 2011) . Each have estimated drivers; Market analysis estimated drivers is 15,000 hours, product design estimated drivers is 2,500 designs, product development estimated drivers is 90
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