Managerial Perspective - Admission/Application Essay Example

this costing method will help the management of the company to take decision of whether to allow other manufacturer manage the research and development activities or not and what price the company should charge if the contract is given to any other company. Therefore, the costing method will give results and help the management in calculating the cost required for each activity and thus, the total costs that should be allocated or charged to the in-house manufacturing department. To identify the cost for a research and development work that will include 1,800 hours of market analysis, 280 designs of 10 products and 92 tests the cost can be calculated using the overhead rate.

The following table calculates the cost for such activity: The overhead rate is also important in knowing how much the company should bid for outside company for such a contract. The research work that includes 800 hours of market analysis, 178 designs of 3 products along with 70 tests the cost can be calculated as below: Ideal manufacturing should use activity based costing method. This method can be beneficial for the company in a number of ways. For instance, the company will be able to identify the cost that it will be incurring when producing or doing research and development in house.

By knowing the in-house cost, the company will be able to charge and allocate this cost of R&D to achieve profitability at the end of the accounting period. In addition to this, by knowing the overhead rate of each activity, the company can analyze the overhead cost of each activity in-house and outside the company and then manage the R&D process accordingly. For instance, if the product design cost in-house is $940 per design and any other company can complete this task at a lower cost than $940, then Ideal manufacturing can use the services of the other company that can complete this task at a lower price.

This will help Ideal manufacturing to reduce the overall cost and increase its