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?

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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?  200 word Thanks and cite peer reviewed source from library.

Use this scenario

MANAGERIAL ANALYSIS

Ideal Manufacturing Company of Sycamore, Illinois, has
supported a research and development (R&D) department that has for many
years 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 to
in-house manufacturing departments (four different product lines), all of which
produce agricultural/farm/ranch related machinery products.

The department has never sold its services outside, but
because of its long history of success, larger manufacturers of agricultural
products have approached Ideal to hire its R&D department for special
projects. Because the costs of operating the R&D department have been
spiraling uncontrollably, Ideal’s management is considering entertaining these
outside approaches to absorb the increasing costs. But, (1) management doesn’t
have any cost basis for charging R&D services to outsiders, and (2) it
needs to gain control of its R&D costs. Management decides to implement an
activity-based costing system in order to determine the charges for both
outsiders and the in-house users of the department’s services.

R&D activities fall into four pools with the following
annual costs.

Market analysis

$1,050,000

Product design

2,350,000

Product development

3,600,000

Prototype testing

1,400,000

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

15,000

hours

Product design

Number of designs

2,500

designs

Product development

Number of products

90

products

Prototype testing

Number of tests

500

tests

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