9/11/02 Prof. Bentz 1

Exercise 1-19

Classify each of the cost items (a –h) into one of the business functions of the value chain chain shown in Exhibit 1- 4 (p. 10)

9/11/02 Prof. Bentz 2

Value Chain

R&D DesignProduc-

tionConsumer

ServiceDistri-bution

Market-ing

Inventoriable product costs

Reimbursable government

contract costs

Decision-relevant costs

9/11/02 Prof. Bentz 3

Classification of Costs

a. Electricity costs for the plant assembling the Presario computer line of products

PRODUCTION

9/11/02 Prof. Bentz 4

Classification of Costs

b. Transportation costs for shipping the Presario line of products to a retail chain.

DISTRIBUTION

9/11/02 Prof. Bentz 5

Classification of Costs

c. Payments to David Kelley Designs for design of the Armada Notebook.

DESIGN

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Classification of Costs

d. Salary of computer scientist working on the next generation of minicomputers.

RESEARCH

9/11/02 Prof. Bentz 7

Classification of Costs

e. Cost of Compaq employee’ visit to a major customer to demonstrate Compaq’s ability to interconnect with other computers.

MARKETING

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Classification of Costs

f. Purchase of products of competitors for testing against potential Compaq products.

RESEARCH & DEVELOPMENT

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Classification of Costs

g. Payments to television network for running Compaq advertisements

MARKETING

9/11/02 Prof. Bentz 10

Classification of Costs

h. Cost of cables purchased from outside suppliers to be used with the Compaq printer.

PRODUCTION