Zip 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. Zip Cola incurs the following costs in thousands): (Click the icon to view the costs.) Read the requirements. Requirements 1, 2 and 3. Classify each of these costs according to its category in the value chain and further break down production costs into three subcategories: Direct Materials (DM), Direct Labor (DL), or Manufacturing Overhead (MOH). Compute the total costs for each value chain category. (If a box is not used in the table, leave the box empty, do not enter a zero.) Zip Cola Value Chain Cost Classification Production Direct Direct Manufacturing Design Materials Labor Overhead Customer Service Cost R & D 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 A 275 700 Plant janitors' wages Delivery truck drivers' wages Payment for new recipe Depreciation on delivery trucks ....... Plant utilities Lime flavoring Rearrangment of plant layout Bottles Salt ..........$ Sales commissions . ...$ Production costs of "cents-off' store coupons for customers....... $ Lemon syrup $ Replace products with expired dates upon customer complaint ... $ Depreciation on plant and equipment ........$ Wages of workers who mix syrup ..........$ Customer hotline ..................... ... $ Freight-in on materials ....................... .. 1,120 1,400 1,410 35 A 500 470 19,000 60 2,700 8,500 170 1 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. How much are the total product costs? Determine the formula, then calculate the total product costs. + + = Total 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? costs of later value-chain elements. The managers of R&D and Design are likely to 7. This can Select the answer that shows how cutting costs might affect other elements of the value chain
