Dean Cola produces a lemon-lime soda. The production process starts with workers mixing the lemon syrup and lime flavors in a secret recipe. The company enhances the combined syrup with caffeine. Finally, the company dilutes the mixture with carbonated water. Dean Cola incurs the following costs (in thousands) (Click the foon to view the costs.) Read the requirements Data Table $ GA 850 $ 265 Plant janitors' wages .. Delivery truck drivers' wages Payment for new recipe...... Depreciation on delivery trucks $ 1,090 $ 200 Plant utilities... $ 750 $ 1,120 Lime flavoring..... Rearrangment of plant layout... 2,000 Bottles ... 1,200 $ $ $ $ 55 450 $ 670 . $ 17,000 .... Salt... Sales commissions.... Production costs of "cents-off store coupons for customers Lemon syrup... Replacement of products with expired dates upon customer complaint Depreciation on plant and equipment. Wages of workers who mix syrup Customer hotline ....... 40 $ $ 3,500 $ 8,000 OB $ 220 Requirements 1. Classify each of the listed costs according to its category in the value chain (R&D, Design, Production, Marketing, Distribution, or Customer Service.) 2. Further break down production costs into three subcategories: Direct Materials (DM), Direct Labor (DL), or Manufacturing Overhead (MOH). 3. Compute the total costs for each value chain category. 4. How much are the total product costs? 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? Value Chain Cost Classification Direct Production Direct Manufacturing Labor Overhead Customer Cost R&D Design Materials Service Marketing Distribution Plant janitors' wages Truck drivers' wages Payment for new recipe Depreciation on trucks Plant utilities Lime flavoring Rearrange 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 miv OURIR Wages of workers who mix syrup Customer hotline Freight-in on materials Total costs Requirement 4. How much are the total product costs? Determine the formula, then calculate the total product costs. Total product costs Requirement 6. Suppose the manager of the R&D and design functions receive your 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 This can 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 adjusted to consumer tastes, more marketing may be required and/or sales may decline. OB. I cutting R&D and Design costs leads to lower quality soda, customer service costs such as returns may also increase OC. 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 OD. All of the above The managers of R&D and Design are likely to This can Select the answer that shows how cutting costs je cut their costs O A. If the recipe is not designed so the soda be. O B. If cutting R&D and Design costs leads to O C. If the recipe is not adjusted to consumer OD. All of the above CO increase their costs e make no changes to costs This can costs of later value-chain elements. the value oduction id-out, production costs will be hig decrease service c may also increase. increase e require ecline
