Costs are important to any manager. Managers focus on trying to keep costs as low as possible. There are many ways to report costs, such as the total amount that is often seen on the income statement or an individual cost for a particular component part.

1. Go to the home page at www.vermontteddybear.com. When you click onto the Web site, what does it suggest that you should do? What is the current headline offering on the site?

2. Click the “What is a Bear-Gram?” icon under “Customer Services” at the bottom of the page. What is a Bear-Gram gift and what does it contain?

3. Take a tour of the factory by clicking on “Visit Our Factory” under About Us near the bottom of the home page and then clicking “Online Factory Tour.” Take the online tour. List several activities shown in the tour. What are some resources that are consumed by these activities?

For one of the activities you listed, give at least one fixed-cost and one variable-cost resource. Suggest a cost driver for one of the activities you listed.

4. Do you think that the Vermont Teddy Bear factory would be a good candidate for using activity-based costing? Explain.

5. From the description of the Vermont Teddy Bear Company, is it a manufacturer or merchandiser? If you looked at the details of its balance sheet, what would you expect to find under Inventories? Do you expect Vermont Teddy Bear Company to have large work-in-process inventories or finished-goods inventories?