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?, assignment help

What is the benefitto Ideal Manufacturing of applying activity-based costing to its R&Dactivity for both in-house and outside charging purposes? (write at last 250words and cite peer reviewed source from library)MANAGERIAL ANALYSISIdeal Manufacturing Companyof Sycamore, Illinois, hassupported a research and development (R&D) department that has for manyyears 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 toin-house manufacturing departments (four different product lines), all of whichproduce agricultural/farm/ranch related machinery products.The department has never sold its services outside, butbecause of its long history of success, larger manufacturers of agriculturalproducts have approached Ideal to hire its R&D department for specialprojects. Because the costs of operating the R&D department have beenspiraling uncontrollably, Ideal's management is considering entertaining theseoutside approaches to absorb the increasing costs. But, (1) management doesn'thave any cost basis for charging R&D services to outsiders, and (2) itneeds to gain control of its R&D costs. Management decides to implement anactivity-based costing system in order to determine the charges for bothoutsiders and the in-house users of the department's services.R&D activities fall into four pools with the followingannual costs.Market analysis$1,050,000Product design2,350,000Product development3,600,000Prototype testing1,400,000Activity analysis determines that the appropriate costdrivers and their usage for the four activities are:ActivitiesCost DriversTotal Estimated DriversMarket analysisHours of analysis15,000hoursProduct designNumber of designs2,500designsProduct developmentNumber of products90productsPrototype testingNumber of tests500tests