Suppose Electronics Shack incurred the following costs at its Forest Lake, Minnesota, store.
Newspaper advertisements ............................................................................. $ 5,700
Payment to consultant for advice on location of new store .............................. $ 2,100
Purchases of merchandise ............................................................................. $ 36,000
Freight-in ........................................................................................................... $ 3,500
Salespeople's salaries ...................................................................................... $ 4,100
Depreciation expense on delivery trucks .......................................................... $ 1,100
Research on whether store should sell satellite radio service ............................. $ 500
Customer Complaint Department ........................................................................ $ 550
Rearrangement of store layout ............................................................................ $ 900
Requirements
1. Classify each cost as to which category of the value chain it belongs (R&D, Design, Purchases, Marketing, Distribution, Customer Service).
2. Compute the total costs for each value chain category.
3. How much are the total product costs?