Question

Requirements? 1, 2 and 3. Classify each of these costs according to its category in the value chain and further breakdown production costs into three? subcategories: Direct Materials? (DM), Direct Labor? (DL), or Manufacturing Overhead? (MOH). Compute the total costs for each value chain category. ?(Leave cells blank that do not require numerical? inputs.)

Plant janitors' wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,000

Delivery truck drivers' wages. . . . . . . . . . . . . . . . . . . . . . . . . . .

$255

Payment for new recipe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,260

Depreciation on delivery trucks. . . . . . . . . . . . . . . . . . . . . . . . . .

$100

Plant utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$350

Lime flavoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$980

Rearranging plant layout. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,200

Bottles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,390

Salt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30

Sales commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$525

Production costs of "cents-off" store coupons for customers. . . . . . .

$730

Lemon syrup. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$14,000

Replace products with expired dates upon customer complaint. . . .

$55

Depreciation on plant and equipment. . . . . . . . . . . . . . . . . . . . .

$3,000

Wages of workers who mix syrup. . . . . . . . . . . . . . . . . . . . . . . .

$

Blast Cola
Value Chain Cost Classification
			Production
			Direct	Direct	Manufacturing			Customer
Cost	R & D	Design	Materials	Labor	Overhead	Marketing	Distribution	Service

Plant janitors' wages
Truck drivers' wages
Payment for new recipe
Depreciation on trucks
Plant utilities
Lime flavoring
Rearranging plant layout
Bottles
Salt

Sales commissions
Production costs of
"cents-off" coupons
Lemon syrup
Replace products with
expired dates
Depreciation on plant
and equipment
Wages of workers who
mix syrup
Customer hotline
Freight-in on materials

Total costs

Requirement 4. Determine the? formula, then calculate the total inventoriable product costs.

		+		+		=	Total inventoriable product costs
		+		+		=

Requirement 5. Suppose the managers of the? R&D and design functions receive? year-end bonuses based on meeting their? unit's target cost reductions. What are they likely to? do? How might this affect costs incurred in other elements of the value? chain?

The managers of? R&D and Design are likely to

?

cut their costs

increase their costs

make no changes to costs

. This can

?

decrease

increase

costs of later? value-chain elements.

Select the answer that shows how cutting costs might affect other elements of the value chain.

A.

If the recipe is not designed so the soda is easy to? produce, or if the production process is not well? laid-out, production costs will be higher than they need to be.

B.

If the recipe is not adjusted to consumer? tastes, more marketing may be required? and/or sales may decline.

C.

If cutting? R&D and Design costs leads to lower quality? soda, customer service costs such as returns may also increase.

D.

All of the above

Answer 1

	Blast Cola
	Value Chain Cost Classification
				Production
				Direct	Direct	Manufacturing			Customer
	Cost	R & D	Design	Materials	Labor	Overhead	Marketing	Distribution	Service
	Plant janitors' wages					$1,000
	Truck drivers' wages							$255
	Payment for new recipe	$1,260
	Depreciation on trucks							$100
	Plant utilities					$350
	Lime flavoring			$980
	Rearranging plant layout		$1,200
	Bottles					$1,390
	Salt			$30
	Sales commissions						$525
	Production costs of
	"cents-off" coupons								$730
	Lemon syrup			$14,000
	Replace products with
	expired dates								$55
	Depreciation on plant
	and equipment					$55
	Wages of workers who
	mix syrup				$3,000
	Customer hotline(Amount not given)								X
	Freight-in on materials(Amount not given)			X
	Total costs	$             1,260	$   1,200	$     15,010	$   3,000	$   2,795	$     525	$     355	$     785
4	Total Inventoriable product cost	Direct Materials	Plus	Direct Labor	Plus	Manufacturing Overhead	Total Inventoriable Product Costs
		$                15,010		$          3,000		$    2,795	$ 20,805
5
	The managers of? R&D and Design are likely to
	cut their costs
	. This can
	increase
	costs of later value-chain elements
	D.
	All of the above