Question

Suppose the cell phone manufacturer Electronics provides the following information for its costs last month Peach (in millions):

a. Delivery expense to customers via UPS . . . . . . . . . . . . . . . . . . . . $ 5

b. Salaries of salespeople . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3

c. Chip set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57

d. Exterior case for phone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8

e. Assembly-line workers' wages . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 11

f. Technical customer support hotline . . . . . . . . . . . . . . . . . . . . . . . $ 4

g. Depreciation on plant and equipment . . . . . . . . . . . . . . . . . . . . . $ 55

h. Rearrange production process to accommodate new robot . . . .$ 1

i. 1-800 (toll-free) line for customer orders . . . . . . . . . . . . . . . . . . . $ 5

j. Salaries of scientists who developed new model . . . . . . . . . . . . . $ 14

Requirements:

1. Classify each of these costs according to its place in the value chain (R&D, Design, Production, Marketing, Distribution, or Customer Service). (Hint : You should have at least one cost in each value chain function.)

2. Within the production category, break the costs down further into three subcategories: Direct Materials, Direct Labor, and Manufacturing Overhead.

3. Compute the total costs for each value chain category.

4. How much are the total inventoriable product costs?

5. How much are the total prime costs? 6. How much are the total conversion costs?

Answer 1