Suppose Motor Shack incurred the following costs at its Ann Arbor, Michigan, store:
Newspaper advertisements ........................................................................... $ 5,100
Payment to consultant for advice on location of new store ........................... $ 2,700
Purchases of merchandise ......................................................................... $ 3 7,000
Freight-in ........................................................................................................ $ 3,700
Salespeople's salaries ................................................................................... $ 4,600
Depreciation expense on delivery trucks ....................................................... $ 1,500
Research on whether store should sell satellite radio service .......................... $ 250
Customer Complaint Department ..................................................................... $ 550
Rearranging store layout .................................................................................. $ 650
Requirements
1. Classify each cost as to which category of the value chain it belongs (R&D, Design, Purchases, Marketing, Distribution, or Customer Service).
2. Compute the total costs for each value chain category.
3. How much are the total product costs?