What Are the R&D Costs?
Pringle Company has a substantial research department. Following are listed, in chronological order, some of the major activities associated with one of Pringle’s research projects.
Project Started
(a) Purchased special equipment to be used solely for this project.
(b) Purchased general equipment that will be usable in Pringle’s normal operations.
(c) Allocated overhead to the project.
Technological Feasibility Established
(d) Purchased more special equipment to be used solely for this project.
(e) Performed tests on an early model of the product.
(f) Allocated overhead to the project.
Product Becomes Ready for Production
(g) Incurred direct production costs.
(h) Allocated overhead to the products.
1. For each activity (a) through (h), indicate whether the cost should be capitalized (C), expensed (E), or included in cost of inventory (I).
2. Repeat (1), assuming that Pringle is a computer software development company.