Broadening Your Perspective Essay

The idea for this example is to further explain operation Based Costing and how it can help the Ideal Manufacturing Company accompaniment its cost at the correct level. Activity establish costing is outlined as An action mechanism based costing (ABC) system recognizes the relationship amongst costs, activities and products, and through this relationship assigns indirect costs to products less arbitrarily than traditional methods.. (Investopedia, 2014)A.) 17-2 broadening your perspective asks that we compute the exercise-based overhead rate for each activity cost. To calculate the activity-based overhead rate for each activity cost we mapping the formula The following chart argon the outgrowths of that formula for each activity cost related to is driver.For market abbreviation we take the market abstract amount/hours of analysis. This is 1,050,000/15,000=$70.00. For the overlap design we take the product design of 2,350,000 change integrity by the number of designs 2,500. T his is calculation is 2,350,000/2,500=940. For the Product Development we calculate the Product Development/ frame of Products. 3,600,000/90=40. Lastly the prototype testing/Number of Tests or 1,400,000/500= 2,800.B) The next section that we are looking at is 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 request 92 engineering tests. The following chart is based on these calculations.The market analysis is calculate by taking the reckon rate of 70*1,800 hours. This calculation comes to a $126,000 cost. The product design is careful by multiplying the previous calculations of 940*280. This calculation comes to $263,200 in costs. The Product Development is calculated by 10 products* recalculated 40,000. This calculation is equal to $400,000in costs. We then take the Prototype testing pre-calculated 2800*92 engineering tests. This calculation is equa l to $257,600 in costs. The tot costs after the sum is $1,046,800.C.) These calculations are taken based on the question asked of How much cost would serve as the basis for price 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?The following chart is the above calculationsFor this dress of calculations we take the 800 hours of analysis time and multiply it by 70 which calculates to the $56,000 in costs. Product design is calculated by taking 178 designs multiplied by 940= $167,320 in costs. Product development is calculated by 3*40,000= 120,000 on costs and prototype testing is equal to 70*2800=196,000 in costs for a total of $539,320.D.) The benefit to Ideal Manufacturing of applying activity for both in house and outside charging purposes is that the use of activity based costing leave show a more(prenominal) accurate selling proce of the product and the exit that is taken. Without activity based costing being used Ideal Manufacturing could be charged a higher selling price. This would not be perfection for Ideal Manufacturing as their competitors could get sm completelyer selling prices. In all activity based costing helps the company to make sure that they are using the correct cost for each of their products and provides the company with a more accurate selling price.ReferenceInvestopedia. (2014). Activity Based Costing. Retrieved from http//www.investopedia.com/terms/a/abc.asp