Acme Manufacturing Company of Portland, Oregon has a Research & Development department that currently provides services to in-house manufacturing departments. Other manufacuturers have expressed interested in using Acme’s R&D department for special projects. Management has decided to conduct an activity-based costing system in order to determine charges for both outside and in-house users of the department’s services.

R&D activities fall into four pools with the following annual costs:
Market Analysis 10,50,000
Product Design 23,50,000
Product Development 36,00,000
Prototype Testing 14,00,000
Activity analysis determines that the appropriate cost drivers and their usage for the four activities are:
Activities Cost Drivers Total Estimated Drivers
Market Analysis Hours of analysis 1500 hours
Product Design Number of designs 2500 designs
Product Development Number of products 90 products
Prototype Testing Number of tests 500 tests