QUESTION: Present a closing statement explaining the benefits to Stayer of applying activity-based costing to its R&D activity for outside charging purposes.

Stayer Farms Company manufactures farm machinery products in the MidAtlantic region of the United States. Within the company it has an in-house research and development division (R\&D) that has been successful in developing and launching many new products under the Stayer brand. The division's activities have always been considered an overhead cost center since it performs services only to in-house manufacturing departments (four different product lines), all of which produce agricultural/farm/ranch-related machinery products. With a strong reputation in the industry, many agricultural product manufacturers have started approaching Stayer, wanting to contract with its R\&D department on product development. Stayer has never sold its services to outside companies. The company's President, however, realizes that it might be helpful to the company commercialize its R\&D services, especially as a way to offset some of the costs related to the R\&D division. To help make an informed decision, the President has asked your accounting team to gather relevant information, perform an analysis of costs, and offer your insights into the benefits of applying Activity-based Costing (ABC) as a basis for charging for the services, both in-house and to outside customers. Calculations for ABC OH Rates \begin{tabular}{|l|l|rr|r|r|r|r|} \hline \multicolumn{7}{|c|}{ Calculations for ABC OH Rates } \\ \hline 20 & \multicolumn{1}{|c|}{ Activity } & Cost & Driver Estimate & \multicolumn{2}{|c|}{ Dollar Value } & \multicolumn{1}{|c|}{ Units } \\ \hline 21 & Market Analysis & $ & 1,050,000 & 15000 & $ & 70 & hour \\ 22 & Product Design & $ & 2,350,000 & 2500 & $ & 940 & design \\ \hline 23 & Production Development & $ & 3,600,000 & 90 & $ & 40,000 & product \\ \hline 24 & Prototype Testing & $ & 1,400,000 & 500 & $ & 2,800 & test \\ \hline \end{tabular}