An R&D project includes the research work necessary to develop a prototype of the desired product and the development work necessary to find potential suppliers and set up manufacturing processes. Your department must allocate a budget to each project to cover these R&D expenses. When the project is completed, the production department is ready to produce the first units of the product at the transfer cost specified in the R&D report, assuming a first production batch of 100,000 units.
The budget required for the completion of a project is a function of several parameters. The budget depends on the requested physical characteristics: the more sophisticated the future product, the higher the budget. It also depends on the experience of the firm with comparable products, i.e. on the number of projects completed in the past with similar characteristics. Finally, the development budget depends on the base cost requested, as explained in the previous section. Note that the R&D department is managed as a profit center, and will not reimburse you if you allocate exceedingly high budgets.
The budget required to complete a project may be estimated through an online query, as explained in section III.10.E.