Beach City Mountain Goods, Inc. produces a range of high quality quilts with traditional patterns from the NC Mountains, and they also produce a wide variety of baseball caps with university logos from around the state. Being forward thinking, they have long used activity based costing in their manufacturing, but now they consider using some activity based costing principles for their corporate overhead. Biggest cost pools in their corporate office are marketing, CEO salary and fringe benefits, and Research and Development.

How should R&D cost for a completely new line of products be allocated?

Select one:

a. Only to baseball caps because they are the newer product.

b. Not at all because they are corporate cost, not associated with any product.

c. Only to quilts because they are the older product.

d. Equally over all products according to units sold.

e. Equally over all products according to sales volume in US$.