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Ad 2. During 2020 Noli began a project to develop new products to add to its lineup. The company hired 2. two engineers and setup a product development lab for them. Management has indicated that it is fully prepared to provide the financial and technical backing to allow the lab to complete any projects it undertakes. Noli line of business is not highly sophisticated so there are no significant technical obstacles for completing any projects. Management expects that any products developed will increase sales in the future. So far the work of the lab has focused on areas of opportunity that would fit into Noli's areas of expertise. No specific projects have emerged as of the end of 2020. For 2020 the total cost of operating the product development lab was $285.000. The CFO is insisting the costs should be capitalized. They have been expensed in the draft financial statements. Below is a summary of the costs incurred: Engineers Equipment Direct overhead Allocation of general company overhead Total cost $135,000 75,000 40,000 35,000 $285,000