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.)

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