Question

2. Big Foot Athletics designs and manufactures running shoes. A new model of shoes, Fast Track, has been developed and is ready for production.
Required:

Which costs will the production manager collect from the value chain, and how would these costs be used in different decisions?

a.	traditional product costs
b.	operating product costs
c.	value-chain product costs

Answer 1

a) Traditional Product Cost

Direct Material, Direct Labor and Manufacturing Overhead are the traditional product costs. These costs would be used for Budgeting, external reporting and cost control.

b) Operating Product Cost

Marketing cost and customer service cost would also be considered while analyzing profitability of the product. The focus will be on revenue and cost of the product.

c) Value- Chain product cost

Production cost of product will be considered with other costs also. Strategic pricing and product mix decisions must be made