Currently, the enterprise operates in a single domain. Development and Testing occur in the same domain. Does it make sense to create a separate domain for development and testing that mimics the production domain?
Yes, it makes sense and is a common practice I have encountered in multiple organizations.
It helps in separation of production and development environments in particular when infrastructure as code is implemented. Further you need a dedicated domain name for development when you want to be able to test the configuration of proxy servers.